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AUD/JPY trades with positive bias around mid-108.00s, lacks bullish conviction

  • AUD/JPY stages a modest recovery from a nearly two-week low, touched on Thursday.
  • The RBA’s hawkish stance and hopes for more stimulus from China underpin the AUD.
  • Firming BoJ rate hike bets and the risk-off impulse benefit the JPY, capping spot prices.

The AUD/JPY pair struggles to capitalize on a modest Asian session uptick and remains close to a nearly two-week low, touched the previous day. Spot prices currently trade just below mid-108.00s, up less than 0.20% for the day, and seem poised to register weekly losses.

The Australian Dollar (AUD) draws some support from a rise in the February inflation expectations to the highest level since July 2023 and the Reserve Bank of Australia's (RBA) hawkish tilt. In fact, RBA Governor Michele Bullock said on Thursday that the central bank will raise interest rates again if inflation becomes entrenched. Furthermore, RBA Assistant Governor Sarah Hunter said that inflation is expected to remain above the 2% to 3% annual target for some time and that the labour market has stabilised from its earlier slowdown but remains tight.

Adding to this, hopes for more fiscal and monetary stimulus from China offer some support to antipodean currencies, including the Aussie. This, along with the emergence of some selling around the Japanese Yen (JPY), turns out to be a key factor acting as a tailwind for the AUD/JPY cross. The downside for the JPY, however, remains cushioned amid easing concerns about Japan's debt levels and hopes that Japan's Prime Minister Sanae Takaichi could be more fiscally responsible. Moreover, expectations that Takaichi's policies will boost the economy and prompt the Bank of Japan (BoJ) to stick to its rate-hike path. This acts as a tailwind for the JPY and caps the AUD/JPY cross.

Meanwhile, investors remain on edge amid speculations that Japanese authorities will intervene to stem further weakness in the domestic currency, which holds back the JPY bears from placing aggressive bets. Apart from this, the risk-off impulse benefits the JPY's relative safe-haven status and contributes to capping the Aussie and the AUD/JPY cross. That said, the technical setup still seems tilted firmly in favor of bullish traders and suggests that any meaningful corrective decline is more likely to be bought into.

Japanese Yen Price This week

The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.42%-0.17%-2.80%-0.39%-1.05%-0.33%-0.96%
EUR0.42%0.26%-2.45%0.03%-0.63%0.09%-0.54%
GBP0.17%-0.26%-2.40%-0.23%-0.89%-0.17%-0.80%
JPY2.80%2.45%2.40%2.54%1.85%2.61%1.84%
CAD0.39%-0.03%0.23%-2.54%-0.57%0.06%-0.57%
AUD1.05%0.63%0.89%-1.85%0.57%0.73%0.10%
NZD0.33%-0.09%0.17%-2.61%-0.06%-0.73%-0.63%
CHF0.96%0.54%0.80%-1.84%0.57%-0.10%0.63%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).

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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