SYDNEY, Jan 23 (Reuters) - The Australian and New Zealand dollars clung onto gains against the yen on Thursday as traders braced for an interest rate decision from the Bank of Japan, while tariff uncertainty kept the two mostly steady against the greenback.
The Aussie held at 98.07 yen ADUJPY=R, having rallied 0.7% overnight to a two-week top of 98.33 yen, while the kiwi hovered at 88.55 yen NZDJPY=R, after rising for a fourth successive session to 88.80 yen.
Currency movement has been generally modest except against the yen which has come under broad pressure ahead of the BOJ decision on Friday. Swaps imply a 93% probability that the BOJ could hike its policy interest rate by 25 basis points to 0.5% but markets are finding its subsequent move harder to predict. 0#JPYIRPR
"Markets seem to view the lack of immediate U.S. tariffs on Japan as supporting the case for a 25bp interest rate hike from the BOJ," said Carol Kong, a currency strategist at the Commonwealth Bank of Australia.
"Even if the BOJ decides to hike, the potential for economic and market disruptions from U.S. policy making suggests the hike may be accompanied by a dovish tone," said Kong, adding that the risks facing AUD/JPY are skewed to the upside.
Against the U.S. dollar, the Aussie AUD=D3 was little changed at $0.6269, having been flat for two days as investors wait for more clarity from U.S. President Donald Trump on his tariff plans.
The kiwi NZD=D3, on the other hand, held at $0.5666, after slipping 0.3% overnight on a tame reading on consumer prices. That reinforced the case for a half-point reduction in the 4.25% cash interest rate, which is almost fully priced in, when the Reserve Bank of New Zealand meets on Feb. 19.
Investors see the rate settling at 3.0% or 3.25% by the end of the year. 0#NZDIRPR
Data showed on Thursday that the number of people leaving New Zealand hit a record level in the year to November, highlighting the current economic downturn.
Australia's fourth-quarter consumer price report is due next week and analysts are hopeful core inflation will slow enough to green light an interest rate reduction from the Reserve Bank of Australia when it meets on Feb. 18.
Futures imply a 78% chance of a quarter-point cut in the 4.35% cash rate, and imply a relatively shallow easing cycle of just 75 basis points overall. 0#AUDIRPR
(Reporting by Stella Qiu; Editing by Christopher Cushing)
((yifan.qiu@thomsonreuters.com))
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