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AUD/JPY sticks to modest gains near multi-week top, remains below 99.00 mark

  • AUD/JPY attracts some follow-through buyers and reacts little to Australian inflation figures.
  • The headline CPI eased to 2.7% YoY in August, while the core CPI remains above the RBA’s target.
  • Bets for another BoJ rate hike in 2024 to limit the JPY losses and keep a lid on the currency pair.

The AUD/JPY cross trades with a positive bias during the Asian session on Wednesday and is currently placed just below the 99.00 mark, or over a three-week top touched the previous day. The mixed fundamental backdrop, meanwhile, warrants some caution for bullish traders and before positioning for an extension of the recent upward trajectory witnessed over the past two weeks or so. 

Against the backdrop of bets for a more aggressive policy easing by the Federal Reserve (Fed), China's new stimulus measures to support the faltering economy boost investors' appetite for riskier assets. This is evident from the prevalent upbeat mood across the global equity markets, which is seen undermining the safe-haven Japanese Yen (JPY) and benefiting the risk-sensitive Aussie. Apart from this, the Reserve Bank of Australia's (RBA) hawkish stance acts as a tailwind for the AUD/JPY cross. 

The Australian central bank reiterated on Tuesday that policy will need to be restrictive until confidence returns that inflation is moving sustainably towards the target range. Adding to this, RBA Governor Michele Bullock stated that the recent data has not significantly influenced the policy outlook. That said, official data released earlier today showed that Australian Consumer Price Inflation (CPI) dropped in August, to its lowest level since early 2022 due to state government rebates. 

In fact, the Australian Bureau of Statistics reported that the headline CPI rose at an annual pace of 2.7% in August, down sharply from 3.5% in July. Meanwhile, core CPI decelerated to the 3.4% YoY rate from 3.8%, though remains above the RBA's 2-3% target band and is not enough to justify rate cuts in the near term. However, expectations that the Bank of Japan (BoJ) will hike interest rates again by the end of this year limit the JPY losses and should cap any further gains for the AUD/JPY cross. 

Investors now look forward to the release of BoJ meeting minutes on Thursday, which, along with the broader risk sentiment, will drive the JPY demand and provide a fresh impetus to the AUD/JPY cross. From a technical perspective, a sustained move above the 50-day Simple Moving Average (SMA) could be seen as a fresh trigger for bullish traders. That said, any subsequent move up is likely to remain capped near the 100.00 psychological mark, representing the 200-day SMA.

Economic Indicator

Monthly Consumer Price Index (YoY)

The Monthly Consumer Price Index (CPI), released by the Australian Bureau of Statistics on a monthly basis, measures the changes in the price of a fixed basket of goods and services acquired by household consumers. The indicator was developed to provide inflation data at a higher frequency than the quarterly CPI. The YoY reading compares prices in the reference month to the same month a year earlier. A high reading is seen as bullish for the Australian Dollar (AUD), while a low reading is seen as bearish.

Read more.

Last release: Wed Sep 25, 2024 01:30

Frequency: Monthly

Actual: 2.7%

Consensus: 2.8%

Previous: 3.5%

Source: Australian Bureau of Statistics

Author

Haresh Menghani

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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