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AUD/JPY recovers to near 89.50 as global sentiment improves

  • AUD/JPY rebounds to around 89.40 in Tuesday’s early European session, adding 1.06% on the day. 
  • PBoC promised funding for sovereign funds to stablise markets hurt by US tariffs. 
  • The economic uncertainty and risk-off mood could boost the safe-haven flows, benefiting the JPY. 

The AUD/JPY cross jumps to 89.40, snapping the three-day losing streak during the early European session on Tuesday. The improving global risk sentiment and encouraging stimulus plans from China provide some support to the Aussie. Traders await the Bank of Japan’s (BoJ) Governor Kazuo Ueda speech later on Wednesday for fresh impetus. 

The People’s Bank of China (PBoC) said early Tuesday that it will provide support to a sovereign fund when needed as it firmly supports its decision to buy more stocks. In a statement, China's central bank said that it will step up funding aid via a re-lending program to Central Huijin Investment Ltd. when it’s necessary, as needed, to ensure capital market stability. Fresh China’s stimulus plans could underpin the China-proxy Aussie as China is a major trading partner to Australia. 

Nonetheless, persistent trade-related uncertainty could boost demand for safe-haven currency like the Japanese Yen (JPY) and create a headwind for AUD/JPY. Japanese Prime Minister Shigeru Ishiba said late Sunday that Japan would continue pressing the United States to lower tariffs on Japanese goods but acknowledged that progress was unlikely to come overnight. 

US Treasury Secretary Scott Bessent said that he would lead the talks, underlining the importance of the US-Japan alliance and stating that the discussions will include tariffs, non-tariff barriers, currency policies, and government subsidies. Despite signaling a willingness to negotiate, Trump dismissed reports that he was considering a delay to new reciprocal tariffs and warned that levies could remain in place indefinitely.

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 BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, 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 supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

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.


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Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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