|

AUD/JPY rises to near 97.00 due to stronger commodity prices, risk-on sentiment

  • AUD/JPY appreciates as the AUD receives support from rising metals prices.
  • The PBoC maintained its one- and five-year Loan Prime Rates at 3.10% and 3.60%, respectively.
  • Japan’s Core Machinery Orders increased by 3.4% MoM in November, marking the strongest growth in nine months.

AUD/JPY continues to gain ground for the second successive day, trading around 97.00 during the early European hours on Monday. The Australian Dollar (AUD) receives support from stronger commodity prices and a broader risk-on sentiment.

However, the Aussie Dollar could face challenges as market expectations grow that the Reserve Bank of Australia (RBA) might start cutting rates as early as next month. Traders are now focusing on Australia’s quarterly inflation report, set to be released next week, for clues about the future direction of interest rates.

The People’s Bank of China (PBOC) announced on Monday that it would keep its Loan Prime Rates (LPRs) unchanged. The one-year Loan Prime Rate (LPR) remains at 3.10%, while the five-year LPR stands at 3.60%. Since China and Australia are close trading partners, any shifts in China’s economy could have an impact on Australian markets.

However, the upside of the AUD/JPY could be limited as the Japanese Yen (JPY) gains modest support from a rise in Japan's Core Machinery Orders, which increased for the second consecutive month, indicating a continued recovery in capital expenditure. According to government data released earlier this Monday, Core Machinery Orders grew by 3.4% month-on-month in November 2024, marking the strongest growth in nine months.

Additionally, growing speculation that the Bank of Japan (BoJ) will raise interest rates later this week bolstered the JPY. BoJ Governor Kazuo Ueda stated last week that there has been significant optimism regarding wage growth. He reiterated that the central bank would further raise the policy rate this year if economic and price conditions show continued improvement.

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.

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

More from Akhtar Faruqui
Share:

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

By subscribing you agree to our Terms and conditions.

Editor's Picks

EUR/USD edges above 1.1750 due to ECB-Fed policy divergence

EUR/USD has recovered its recent losses registered in the previous session, trading around 1.1760 during the Asian hours on Friday. Traders will likely observe Germany’s Manufacturing Purchasing Managers’ Index data later in the day.

GBP/USD gathers strength above 1.3450 on Fed rate cut bets, BoE's gradual policy path

The GBP/USD pair gathers strength to around 1.3480 during the early Asian session on Friday. Expectations of the US Federal Reserve rate cuts this year weigh on the US Dollar against the Pound Sterling. Philadelphia Fed President Anna Paulson is set to speak later on the weekend. 

Gold climbs to near $4,350 on Fed rate cut bets, geopolitical risks

Gold price rises to near $4,345 during the early Asian session on Friday. Gold finished 2025 with a significant rally, achieving an annual gain of around 65%, its biggest annual gain since 1979. The rally of the precious metal is bolstered by the prospect of further US interest rate cuts in 2026 and safe-haven flows.

Bitcoin, Ethereum and Ripple enter the New Year with breakout hopes

Bitcoin, Ethereum, and Ripple entered the new year trading at key technical levels on Friday, as traders seek fresh directional cues in January. With BTC locked in a tight range, ETH is approaching its 50-day Exponential Moving Average, while XRP is nearing resistance. A clear breakout across these top three cryptocurrencies could help define market momentum in the opening weeks of the year.

Economic outlook 2026-2027 in advanced countries: Solidity test

After a year marked by global economic resilience and ending on a note of optimism, 2026 looks promising and could be a year of solid economic performance. In our baseline scenario, we expect most of the supportive factors at work in 2025 to continue to play a role in 2026.

Crypto market outlook for 2026

Year 2025 was volatile, as crypto often is.  Among positive catalysts were favourable regulatory changes in the U.S., rise of Digital Asset Treasuries (DAT), adoption of AI and tokenization of Real-World-Assets (RWA).