BOJ’s Efforts are Hurting Australia

The more than $70 billion a month Japan is spending to end deflation is feeding demand for the higher-yielding Aussie, threatening the Reserve Bank of Australia’s efforts to stimulate its economy.

Japanese investors bought 91.3 billion yen ($922 million) more Australian debt than they sold in July, the first overall additions since October and the largest in a year, official data show. The Australian dollar is poised for its biggest monthly surge versus the yen since January, outpacing all but the kiwi among 10 major developed currencies.

RBA Governor Glenn Stevens said this month a reduction of record-low interest rates remains possible and that a weaker currency would help an economy set for its slowest expansion in four years. Sustained easing by the Bank of Japan and the Federal Reserve is fueling a stronger Aussie that may force the RBA to add to 2.25 percentage points of cuts over two years, JPMorgan Chase & Co estimates.


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