The Australian and New Zealand dollars regained ground against the yen on Friday after the Bank of Japan made no changes to its dovish monetary policy, while bonds suffered heavy weekly losses on local rate hike bets.
The Aussie AUDJPY=R rose 0.4% to 95.08 yen after falling 0.9% overnight and hitting a one-week low of 94.5 yen. The kiwi NZDJPY=R climbed 0.3% to 87.8 yen, having eased 0.5% overnight to 87.21 yen.
The Bank of Japan maintained ultra-low interest rates, left its yield control policy unchanged and signalled it was in no rush to phase out its massive monetary stimulus. Governor Kazuo Ueda is due to give a news conference at 0630 GMT.
Against the greenback, the Aussie AUD=D3 recovered from an earlier dip and ended up flat for the day at $0.6422. The New Zealand dollar NZD=D3 was little changed at $0.5934.
The two have traded within a narrow range since plumbing 10-month lows in early September on concerns about the health of Australia's and New Zealand's biggest trading partner China. The Aussie has found strong support at $0.6358 but has failed to stand above $0.6522.
"In our view, the balance of risks to AUD/USD and NZD/USD are starting to even up," said Joseph Capurso, head of international economics at Commonwealth Bank of Australia.
"With the Chinese economy improving modestly in August, iron ore and dairy prices lifting, the catalyst for AUD/USD and NZD/USD to step down materially is likely to come from the USD leg."
Australian bonds have had a hellish week, with benchmark ten-year yields AU10YT=RR jumping 27 basis points to 4.380%, their highest point since 2014. Three-year yields AU3YT=RR were also up 25 bps for the week to 4.073%, their highest level in more than two months.
A hawkish Federal Reserve has led traders to price in more rate hikes Down Under. They are wagering another rate hike from the Reserve Bank of Australia by March next year and even a small chance of a second one in May.
0#RBAWATCH Pricing also shows the market thinks there is a split chance that the Reserve Bank of New Zealand could surprise with another hike by the end of the year, even though the central bank has signalled its done hiking rates.
0#RBNZWATCH
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