...Traditionally, Australian assets have been particularly attractive to Japanese investors, with the yield on the Australian dollar still the highest of any developed country at 3 per cent. Higher yielding emerging market currencies such as the Russian rouble at 8.25 per cent, the South African rand at 5 per cent and the Chilean peso at 5 per cent are also popular with income seekers.
Still, the BoJ effect could prove to be temporary.
“We would expect the commodity currencies to gain some near-term support from a Japanese investor reallocation, with their attractive yields, liquid bond markets and high ratings,” says Ian Stannard, foreign exchange strategist at Morgan Stanley. (here)
And Japanese mega-easing is cutting into the Aussie banks' profit margins too. Not entirely convinced by the argument but anyway:
FLOODING the financial system with liquidity has worked a treat in refloating the global economy, but don't ask ANZ boss Mike Smith about the impact on his wholesale banking margins, particularly in Asia.
The Bank of Japan is the latest convert to quantitative easing (QE) -- central banks buying assets such as government bonds to pump money into the economy directly.
If the impact of similar QE programs by the US Federal Reserve and the European Central Bank in 2008 and 2011-12 is any guide, liquidity will expand and pressure will intensify on Asian wholesale banking margins.
The problem for the banks is that they make money by charging higher interest rates on their loans than they pay on their deposits. Once official rates start heading to zero, and deposit rates follow, any further reduction in lending rates squeezes the margin. (here)
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