AUD/JPY trades around the highest since November 2014
- AUD/JPY reached highs since November 2014 following the lower-than-expected Tokyo CPI data released on Friday.
- The Australian 10-year Government Bond Yield has reached a 21-week high of 4.59%.
- Tokyo CPI has fallen below the Bank of Japan’s (BoJ) 2% target for the second time this year.
- The BoJ opted to maintain the key interest rate at 0% during its April meeting.
AUD/JPY extends its winning streak for the fifth consecutive session on Friday. The Australian Dollar (AUD) finds support from increasing bids for a hawkish stance for the Reserve Bank of Australia’s (RBA) monetary policy. The revision by TD Securities indicates a delay in the expected rate cut by the Reserve Bank of Australia (RBA) until February 2025 instead of November. This boosts the Australian Dollar (AUD) and consequently supports the AUD/JPY cross.
Australia’s Consumer Price Index (CPI) data on Wednesday, surpassing expectations, is also playing a role in an increase in Australian government bond yields as traders price out expectations regarding interest rate cuts by the RBA in 2024. The Australian 10-year Government Bond Yield has reached a 21-week high of 4.59%, indicating a significant upward trend.
The Japanese Yen (JPY) has plunged following Japan’s Tokyo Consumer Price Index (CPI) release, which came in well below expectations early Friday. This print marks the second time this year that inflation has fallen below the Bank of Japan’s (BoJ) 2% target. The BoJ board members opted to maintain the key interest rate at 0% during its April monetary policy review meeting on Friday. Notably, in March, the central bank raised rates for the first time since 2007, signaling the end of Japan’s negative interest rate era, which commenced in 2016.
Daily Digest Market Movers: AUD/JPY gains ground after weaker Tokyo CPI data
- BoJ Governor Kazuo Ueda provided insights into the central bank’s decision to maintain the status quo during the post-policy meeting press conference on Friday. Ueda outlined that the BoJ will adjust the degree of monetary easing if the underlying inflation rate rises. Additionally, He emphasized that easy financial conditions will be maintained for the time being, indicating the BoJ’s commitment to supporting economic recovery and stability through accommodative monetary measures.
- Tokyo Consumer Price Index rose 1.8% YoY in April, well below the previous print of 2.6%. Markets were broadly expecting Tokyo inflation to hold steady over the period. The Core CPI fell sharply to 1.6% year-on-year, marking its lowest level since March 2022 and falling well below forecasts of 2.2%.
- SocGen’s assessment of the potential for USD/JPY to test the Japanese Ministry of Finance’s intervention limits due to persistent US rate expectations and recent market dynamics suggests a significant focus on the interplay between US economic data and currency movements.
- On Friday, a report from Reuters said that the Bank of Japan (BOJ) is expected to project that inflation will remain close to its 2% target in the coming years and signal its preparedness to raise interest rates from their near-zero levels. This stance by the BOJ is aimed at preventing Yen depreciation and discouraging market participants from pushing the currency to fresh 34-year lows.
- Jiji news agency reported on Thursday that the Bank of Japan (BOJ) might reduce its bond purchases appears to be exerting a more significant influence on the market sentiment compared to the lower-than-expected Tokyo Consumer Price Index (CPI) data released today.
- According to Luci Ellis, Westpac’s chief economist and former Assistant Governor (Economic) at the Reserve Bank of Australia, inflation slightly surpassed expectations in the March quarter. They anticipate the Board will maintain interest rates in May and have revised the projected date for the initial rate reduction from September to November this year.
- Barrenjoey Capital Partners, a leading Australian investment banking firm. advised to utilize the trimmed mean to rank Australia’s inflation. Australia’s six-month annualized rate of trimmed mean inflation, standing at 3.6%, is notably the highest worldwide, surpassing even the United States’ 3.2% six-month annualized rate of trimmed mean inflation.
- Australia’s Consumer Price Index (CPI) rose by 1.0% QoQ in the first quarter of 2024, against the expected 0.8% and 0.6% prior. CPI (YoY) increased by 3.6% compared to the forecast of 3.4% for Q1 and 4.1% prior. Australia’s Monthly Consumer Price Index (YoY) rose by 3.5% in March, against the market expectations and the previous reading of 3.4%.
- According to the Japan Times, the proportion of Japanese companies intending to increase their pay scales reached 70.7%, marking a rise of 6.3 percentage points from the previous year. Additionally, the number of companies planning to implement pay-scale hikes and regular pay increases totaling 5% or more amounted to 36.5%, nearly doubling from the previous year. This could provide support for the Yen.
Technical Analysis: AUD/JPY rises to the major level of 102.50
The AUD/JPY trades around 102.50 on Friday, surpassing the upper boundary of the daily ascending channel, trading around 102.84, the highest since November 2014. Additionally, the 14-day Relative Strength Index (RSI) is trending above the 50-level, strengthening the bullish sentiment. The immediate resistance is seen at the psychological level of 103.00.
On the downside, immediate support for the AUD/JPY pair could be found at the psychological level of 102.00. If the pair breaches below this level, the AUD/JPY cross could lead to a further decline toward the psychological level of 100.00, followed by the 21-day Exponential Moving Average (EMA) at the level of 99.95. Further depreciation will likely test the lower boundary of the ascending channel around the level of 99.00.
AUD/JPY: Daily Chart
Japanese Yen price today
The table below shows the percentage change of the Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.01% | 0.02% | -0.09% | -0.27% | 0.70% | -0.03% | -0.09% | |
| EUR | 0.01% | 0.01% | -0.07% | -0.26% | 0.71% | -0.02% | -0.08% | |
| GBP | -0.01% | -0.03% | -0.08% | -0.29% | 0.69% | -0.06% | -0.10% | |
| CAD | 0.08% | 0.06% | 0.09% | -0.20% | 0.78% | 0.02% | -0.01% | |
| AUD | 0.27% | 0.27% | 0.29% | 0.21% | 0.98% | 0.23% | 0.18% | |
| JPY | -0.71% | -0.72% | -0.71% | -0.79% | -0.99% | -0.76% | -0.80% | |
| NZD | 0.03% | 0.04% | 0.07% | -0.02% | -0.23% | 0.76% | -0.03% | |
| CHF | 0.07% | 0.07% | 0.09% | 0.01% | -0.18% | 0.78% | 0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.