AUD/JPY pares gains, possibly due to BOJ intervention in play
- The Australian Dollar surges driven by growing hawkish sentiment surrounding RBA, following the hot CPI data.
- Judo Bank chief economic adviser Warren Hogan predicts that the RBA might increase the cash rate three times in 2024.
- The safe-haven JPY loses ground due to the uncertainty surrounding the BoJ’s rate outlook.
AUD/JPY continues its winning streak for the sixth successive session on Monday, hovering around 104.50, a level not seen since April 2013. The persistent upward momentum of the AUD/JPY pair is driven by the increasing hawkish sentiment surrounding the Reserve Bank of Australia (RBA), following the release of last week’s Consumer Price Index (CPI) inflation data.
The unexpected surge in inflation figures prompted economists to revise their earlier forecasts significantly. Warren Hogan, chief economic adviser at Judo Bank, told “The Australian Financial Review” his anticipation of the central bank raising the cash rate three times this year, reaching 5.1%, with the first hike likely in August. Investors now look forward to Retail Sales for March on Tuesday, which gauges Australia’s consumer spending. It has a significant bearing on Australia’s inflation and GDP.
The Japanese Yen (JPY) tumbled to new multi-decade lows following the Bank of Japan’s (BoJ) decision to maintain policy settings unchanged on Friday. Uncertainty surrounding the BoJ’s rate outlook, indications of cooling inflation in Japan, and a generally optimistic sentiment in equity markets are pivotal factors eroding the safe-haven appeal of the JPY.
Furthermore, expectations for a prolonged wide interest rate differential between Japan and the other countries imply that the JPY’s trajectory is biased towards further decline. With Japanese markets closed on Monday for Showa Day, market dynamics may see limited shifts in the absence of trading activity.
Daily Digest Market Movers: AUD/JPY rises on increasing hawkish sentiment surrounding RBA
- Australia’s stock market experienced a robust rally on Monday, inspired by a strong performance on Wall Street. The ASX 200 Index recovered some ground lost on Friday, with all 11 industry sectors trading in positive territory. Friday’s rally on Wall Street was fueled by impressive earnings reports from tech giants such as Microsoft and Google’s parent company, Alphabet, propelling the Nasdaq up by more than 2%
- On Friday, TD Securities’ revision suggests a postponement of the anticipated rate cut by the Reserve Bank of Australia (RBA) until February 2025, shifting from the previously anticipated date in November. This development strengthens the Australian Dollar (AUD) and, in turn, bolsters the AUD/JPY pair.
- 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%.
- 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.
- Australia’s Consumer Price Index (CPI) increased to an all-time high of 137.40 points in the first quarter of 2024 from 136.10 points in the fourth quarter of 2023.
- As reported by the Japan Times, the percentage of Japanese companies aiming to raise their pay scales has surged to 70.7%, representing a notable increase of 6.3 percentage points compared to the prior year. Furthermore, the number of companies intending to implement pay-scale hikes and regular pay increases totaling 5% or higher has nearly doubled from the previous year, reaching 36.5%. This trend holds the potential to enhance the purchasing power of individuals, potentially leading to an uptick in consumer prices.
Technical Analysis: AUD/JPY surges to the major level of 104.50
The AUD/JPY trades around 104.50 on Monday, surpassing the upper boundary of the daily ascending channel. 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 105.00. A breakthrough above this level could support the cross to test the highest level of 105.43 recorded in April 2013.
On the downside, immediate support for the AUD/JPY pair could be found at the psychological level of 104.00. If the pair breaches below this level, the AUD/JPY cross could lead to a further decline toward the nine-day Exponential Moving Average (EMA) at 101.59, aligned with the lower boundary of the ascending channel and a major level of 101.50.
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 | -0.19% | -0.24% | -0.14% | -0.61% | -0.50% | -0.51% | -0.27% | |
| EUR | 0.19% | -0.05% | 0.05% | -0.39% | -0.30% | -0.29% | -0.08% | |
| GBP | 0.25% | 0.05% | 0.10% | -0.34% | -0.25% | -0.27% | -0.02% | |
| CAD | 0.14% | -0.05% | -0.10% | -0.45% | -0.35% | -0.37% | -0.18% | |
| AUD | 0.61% | 0.39% | 0.35% | 0.45% | 0.10% | 0.08% | 0.34% | |
| JPY | 0.51% | 0.17% | 0.44% | 0.22% | -0.22% | -0.12% | 0.16% | |
| NZD | 0.49% | 0.29% | 0.24% | 0.35% | -0.12% | -0.21% | 0.22% | |
| CHF | 0.28% | 0.10% | 0.05% | 0.14% | -0.29% | -0.16% | -0.24% |
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 been 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.