The Australian dollar traded to a six-year high against the Japanese yen Wednesday morning, as global and Japanese investors flee cash and bonds in search of higher returns.
Despite the U.S. Federal Reserve and other major central banks pledging to rein in inflation, real interest rates remain low, as inflation surges.
Investors are rushing into high-beta trades, and not because of highly optimistic global growth forecasts or a calm geopolitical landscape.
Instead, the growth-seeking flows are driven by fears of being trapped in cash or low-yielding bonds that will lose value due to inflation.
The race out of bonds and cash has manifested in Bitcoin rising 15% from its March 14 low while the Nasdaq has soared nearly 13% and the AUD/JPY gained over 7% in the same period nL2N2VP2RYnL3N2VP277nL2N2VQ01V.
Some analysts believe such rallies are overdone and the risks associated with the Russia-Ukraine crisis and potential missteps by central banks will result in an unhappy ending for overextended investors.
But the momentum higher is strong for the short term.
AUD/JPY is trending higher in the short term with the 5, 10 and 21-day moving averages in a bullish alignment.
Only a fall below the 10-DMA at 87.23 would warn a top is forming.
The objective of the current move is the 76.4% retracement of the 2013-2020 drop at 94.67.
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