The Australian and New Zealand dollars hovered close to highs on the yen on Monday after a dovish hike from the Bank of Japan, with flows out of the yen helping the two manage some decent gains for the year. The Aussie held at 104.25 yen, having surged 1.4% on Friday to settle just below a 17-month top of 104.39 hit in early December. The kiwi traded at 90.77 yen, having jumped 1.1% on Friday to hover below a 13-month high of 90.88. BOJ Governor Kazuo Ueda stuck to his usual cautious rhetoric after hiking interest rates to 30-year highs on Friday, disappointing some hawks that had looked for clearer guidance on further policy tightening. “We expect AUD/JPY to increase further over the coming months,” said Kristina Clifton, an analyst at the Commonwealth Bank of Australia. “The pair still has fundamental support from solid risk sentiment and more recently, by wider interest rate differentials between Australian and Japanese ten-year government bond yields.” Against the dollar, the Aussie inched up 0.1% to $0.6618, having lost 0.6% last week. As 2025 draws to a close, there is little catalyst - apart from the minutes of its central bank’s last policy meeting of the year due on Tuesday - that could be market-moving. For the year, it has rallied 7% to end four straight years of losses, helped by a weaker US dollar and expectations that the Reserve Bank of Australia may have to resume hiking interest rates next year as inflation surged. Ten-year Australian government bond yields jumped 43 basis points this year to 4.8% as markets moved to fully price in a rate hike from the RBA in the first half of next year. There is a 72% probability of a follow-up move by the year end. The kiwi dollar rose 0.2% to $0.5769, having finished last week 0.8% lower. For the year, it is up 3.1%, with further gains being capped by easing expectations for the Reserve Bank of New Zealand. Swaps imply rates are on hold at 2.25% throughout the first half of the year, with the first hike being fully priced not until October next year.