The Australian dollar jumped to a five-week peak against the yen today, while holding not far from two-year highs on the US dollar, as Japan intervened to sell its currency.
The local dollar had already shot as far as $US0.9457 offshore Tuesday, taking it back to heights held in July 2008 before the global financial crisis sent it crashing.
Then the Bank of Japan stepped in to sell the yen in an effort to restrain its export-sapping strength, and helped lift the dollar 2 per cent to 79.62 yen.
The surprise intervention was aimed at dragging the ailing US dollar up from a 15-year low of 82.87 yen and proved enough to lift it to 84.85 late in the session.
As a result the Aussie pulled back slightly on the US dollar to close at $US0.9373, but was still ahead by 5 per cent for the month so far.
The next targets are highs from July 2008 at $US0.9464, $US0.9477 and $US0.9529 and dealers are starting to talk of parity, though they have been disappointed repeatedly in the past.
The US dollar had been hit by talk the Federal Reserve was moving closer to more quantitative easing.
"I still think the US dollar weakness is going to continue. The kiwi, Aussie and euro remain a buy on dips at this stage," said Daniel Brdanovic, HSBC senior manager treasury.
Australian data out Wednesday were mixed, a change from the recent run of uniformly upbeat news. A measure of consumer sentiment surprised by falling 5 per cent even though recent economic news had been very positive.
Yet the level of confidence was still historically high and consistent with economic growth above 3 per cent going forward.
New home starts rose a modest 0.8 per cent in the second quarter but only because the previous quarter was revised up strongly to show an increase of 9.1 per cent.
The level of new homes starts topped forecasts at a six-year high, which should underpin construction for a while yet.
The market is now looking to a speech by RBA assistant governor Philip Lowe on Thursday titled "The Development of Asia: Risk and Returns for Australia."
Australian three-year bond futures were off 0.030 points at 95.230, while 10-year futures eased 0.020 points to 94.915.
Reuters