AUD/JPY jumps to 90.50 inspired by BoJ’s dovish stance, RBA policy eyed

• AUD/JPY has scaled to 90.50 amid weakness in the Japanese Yen as BoJ has favored a continuation of easy monetary policy.
• BoJ Ueda decided to stay with an ultra-loose policy as the impact of higher import prices has already been discounted.
• The RBA is expected to continue a pause on interest rates as Australian inflation is declining consistently.

The AUD/JPY pair has shifted sustainably above the critical resistance of 90.00 in the Asian session. The cross is continuously moving higher for the past two trading session. The risk barometer has been fueled by the maintenance of the ultra-dovish policy stance by the Bank of Japan (BoJ).

A continuation of the expansionary monetary policy by the BoJ to keep inflation sustainably above 2% impacted heavily on the Japanese Yen. New BoJ Governor Kazuo Ueda decided to stay with ultra-loose policy considering the fact that the impact of higher import prices has already been discounted in the domestic economy more than expected. Domestic demand is struggling to show a recovery despite enormous efforts of accelerating wages by the central bank and the administration.

Also, the BoJ unanimously voted in favor of keeping the band of Japanese Government Bonds (JGBs) steady. This indicated that the central bank has no intention of exiting from the ultra-dovish policy for now.

On the Australian Dollar front, investors are keenly awaiting the interest rate decision by the Reserve Bank of Australia (RBA). Considering the fact that Australian inflation is declining consistently for the past three months and RBA policymakers are anticipating a slowdown in the economy ahead, a continuation of the pause is widely expected.

China’s PMI released by the National Bureau of Statistics (NBS) has not impacted the Australian Dollar heavily. China’s Manufacturing PMI (April) dropped to 49.2 from the consensus of 51.4 amid persistent pessimism in producers and a weak real estate market. The Services PMI surprisingly jumped to 56.4 from the estimates of 50.4.

It is worth noting that Australia is the leading trading partner of China and a decline in Chinese economic activities usually impacts the Australian Dollar.