Australian, NZ dollars buoyed by Japanese Toshin fund talk

Wednesday 22nd April 2009

The Australian and New Zealand dollars gained versus the yen on market speculation Nomura Holdings Inc., Japan’s largest brokerage, is preparing a US$11 billion foreign currency investment fund, or Toshin fund, some of which may be funnelled into local markets.

As much as US$4 billion of the fund could be placed in Australia, boosting the cross rate against the yen as sentiment for high-yielding currency improves. Along with Australia, the fund is eyeing assets in the US, Brazil, South Africa, and Turkey, and may enter New Zealand depending on the level of subscriptions, analysts said.

"Considering the size and span of the fund, it’s had an impact on the (Australian) dollar,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney. “The type of speculation on these funds needing placement is beneficial to the cross on the yen in general.”

The Australian dollar rose to 69.91 yen from 68.89 yen yesterday, while the kiwi advanced to 55.33 yen from 54.71 yen. The US dollar has gained to 98.67 yen from 98.15 yen yesterday.

The fund will be launched on April 24, and while the speculation has helped lift the currencies, subscriptions are “very low” and the company is struggling to sell it, Trinh said.

There were similar difficulties selling the previous Toshin fund three months ago, she said.

Investors in Japan face the puniest deposit rates of any major economy, which typically ensures there’s latent demand for investments that tap higher returns in overseas markets.

Japanese investors tend to keep their funds at home, though, when they deem global markets to be in decline. The Bank of Japan’s key interest rate is just 0.1%, while Australia and New Zealand have central bank rates of 3%. The Reserve Bank of New Zealand is expected to cut the official cash arte 50 basis points to 2.5% on April 30, according to a Reuters survey.

“It doesn’t seem to be a particularly good time to launch a fund” with all of uncertainty surrounding the global markets, said Imre Speizer, currency strategist at Westpac Banking Corp.

Nomura has been shifting its focus beyond Japan as it seeks to become a global investment bank since the purchase. At the same time, it slashed 50 investment banking positions in Asia as the global slump cuts into its revenue. The Japanese brokerage hired five stock analysts in London as it seeks to expand its stock coverage following its acquisition of Lehman Brothers Holdings Inc.’s European holdings last year.

Businesswire.co.nz

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