AUD/JPY moves toward 94.00, RBA keeps interest rate unchanged

AUD/JPY traces back to the previous day’s gains, trading lower around 94.20 during the Asian session on Tuesday. The cross is experiencing downward pressure as the Reserve Bank of Australia (RBA) keeps the interest rate unchanged as expected. The RBA maintains the key policy rate at 4.10% as inflation seems to be stabilizing.

Additionally, the downbeat China’s economic data weighed on the Australian Dollar (AUD). Caixin Services PMI (Aug) reduced to 51.8 figure from 54.1 prior.

The spotlight will be on the Reserve Bank of Australia (RBA) Statement, which could provide insights into future rate hikes, potentially supporting the Australian Dollar (AUD). Traders will likely monitor the release of Australia's Gross Domestic Product (GDP) for the second quarter, scheduled for Wednesday. The quarterly growth figure is expected to increase by 0.3%.

Japan's disappointing Household spending (YoY) data for July, which was revealed on Monday, could be providing support to undermine the Japanese Yen (JPY). The data showed the worst drop since February, 2021, with the actual reading printed at -5.0%, notably worse than the anticipated -2.5%. June's figure was -4.2%.

The Bank of Japan (BOJ) is continuing to uphold its accommodative monetary policy. BOJ Board member Toyoaki Nakamura mentioned last week that policymakers require additional time to shift towards monetary tightening. Given this situation, the disparity in monetary policy between Australia and Japan could limit the downside potential of the AUD/JPY cross for the foreseeable future.