- AUD/JPY gains ground due to uncertainties regarding the future BoJ interest rates outlook.
- BoJ's Summary of Opinions highlighted divisions among policymakers regarding the timing of future rate hikes.
- The Australian Dollar faced challenges as China's latest stimulus measures fell short of investors’ expectations.
AUD/JPY retraces its recent losses from the previous session, trading around 101.20 during early European hours on Monday. The upside of the AUD/JPY cross is attributed to lower Japanese Yen (JPY) following the release of the Bank of Japan's (BoJ) Summary of Opinions. The BoJ’s October report highlighted divisions among policymakers regarding the timing of future interest rate hikes.
Some members of the Bank of Japan expressed concerns about global economic uncertainties and rising market volatility, particularly around the Yen's depreciation. Still, the central bank has suggested it might increase its benchmark policy rate to 1% by the latter half of the 2025 fiscal year.
In Japan, Prime Minister Shigeru Ishiba’s Cabinet resigned en masse before the Diet (parliament) during an extraordinary Cabinet meeting on Monday morning. With the ruling coalition of the Liberal Democratic Party (LDP) and Komeito now holding less than a majority in the House of Representatives, Monday’s vote is expected to lead to a runoff between Ishiba and Yoshihiko Noda, the leader of the major opposition party, the Constitutional Democratic Party.
The Australian Dollar (AUD) edged higher despite a generally cautious outlook due to concerns over Donald Trump’s proposed tariff increases on Chinese goods, which could impact Australian markets as China is one of its largest trading partners.
Further weighing on the Australian Dollar were China’s latest stimulus measures, which fell short of investor expectations and dampened demand prospects for Australia’s top trading partner. On Friday, China announced a 10 trillion Yuan debt package aimed at easing local government financing pressures and supporting sluggish economic growth; however, the package stopped short of including direct economic stimulus initiatives.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Gold jumps to new record-high above $3,220 as China ramps up tariffs on US goods
Gold extends its relentless rally and trades at a new all-time high above $3,220 in the European session on Friday. The precious metal benefits from safe-haven flows following China's decision to raise additional tariffs on US imports to 125% from 84%.
EUR/USD climbs to fresh multi-year high above 1.1400 on intense USD weakness
EUR/USD continues to push higher and trades at its strongest level since February 2022 above 1.1400 in the European session on Friday. The US Dollar (USD) stays under heavy pressure after China raised tariffs on US imports in retaliation, fuelling the pair's upsurge.
GBP/USD extends the advance to near 1.3100 as USD selloff picks up steam
GBP/USD preserves its bullish momentum and advances to near 1.3100 in the European session. The persistent USD weakness remains the main market theme as fears over the deepening China-US trade conflict triggering a recession in the US continue to grow.
Bitcoin, Ethereum and Ripple show weakness while XRP stabilizes
Bitcoin and Ethereum prices are hovering around $80,000 and $1,500 on Friday after facing rejection from their respective key levels, indicating signs of weakness. Meanwhile, Ripple broke and found support around its critical level; maintenance suggests a recovery on the cards.
Trump’s tariff pause sparks rally – What comes next?
Markets staged a dramatic reversal Wednesday, led by a 12% surge in the Nasdaq and strong gains across major indices, following President Trump’s unexpected decision to pause tariff escalation for non-retaliating trade partners.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.