Australian Dollar / Yen - AUD/JPY
The external value of the Australian dollar (AUD) depends on the farm raw material exchange rates as farm raw material represent 40% of the Australian exports.
In the years 2000, the Australian central bank ran a particularly high interest rate policy (7% in 2005 and until 8.25% in 2007). At the same time, the Bank of Japan, faithful to the tradition of an under-valued yen in order to promote the Japanese exports but overall in order to revive the economic growth which was not good in the 90s, ran a monetary policy that made the Bank fix very low key interest rates.
The “carry trade” operations (purchases of the high interest rate currency done in the low rate currency), run by the investors who want to take advantage on the differential of interest rates, were since then very important on the AUD/JPY cross, with as a consequence the appreciation of the Australian currency against the yen.
The rise of the farm raw material exchange rate from 2002 to 2007 had the same consequence.
In January 2000, the exchange value was worth AUD/JPY = 68,99, the cross slowly decreased on the Forex until November 2000 (AUD/JPY = 56,04), then the Australian dollar slowly but continuously appreciated (AUD/JPY = 69,37 in January 2002 and AUD/JPY = 71,15 in July 2002). We had AUD/JPY = 85 in March 2004, this exchange value remained nearly stable all over the year 2005. Then a new bullish trend happened until the value AUD/JPY = 108 in October 2007, there would be the same value in March 2008.
The collapse of the raw material led to a brutal and important decrease of the AUD/JPY cross until a lower AUD/JPY = 61 in February 2009 (-40% in a year).
The Australian dollar increased soon against the Yen and we had AUD/JPY = 80,881 at the beginning of December 2009.
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