THE Australian dollar was little changed against its US counterpart yesterday,but it hit a 19-month intraday high against the yen as investors predicted Japan's new government would encourage a return to reflationary policy by the Bank of Japan.
The dollar hit an intraday high of Y=88.98,its strongest level since May last year,after the Liberal Democratic Party swept to victory on Sunday.Shinzo Abe,head of the LDP,made strong campaign pledges for an aggressive new monetary policy,big public-works spending to pump up growth,and a harder line against China in territorial disputes.
Still,Bank of America Merrill Lynch's Australian chief economist,Saul Eslake,said the LDP's promise of a tougher foreign policy stance against China"might make people more nervous about the region as a whole",and so weaken the Australia currency in the long term."If capital were to leave this(regional)time zone,that would be bad for the Australian dollar,"Mr Eslake added.
At 5pm AEDT,the dollar was at$US1.0535,down US0.09c.
Locally,investors were waiting to see the minutes from the Reserve Bank's December meeting,due out today,to gauge how far and how fast the central bank would lower rates next year after cutting rates to 3 per cent on December 4
