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Australian Dollar climbs against Yen as structural forces weigh on JPY

  • The Australian Dollar is under pressure after Chinese economic indicators missed expectations.
  • The Japanese Yen remains pressured by rising energy prices and fiscal concerns in Japan.
  • MUFG says fundamental factors continue to favor further Japanese Yen weakness.

AUD/JPY trades around 113.65 on Monday at the time of writing, up 0.16% on the day. The pair rebounds as persistent weakness in the Japanese Yen (JPY) supports the cross, despite disappointing economic data from China limiting gains for the Australian Dollar (AUD).

The latest Chinese data renewed concerns about the growth momentum of the world’s second-largest economy, a negative factor for the Australian Dollar (AUD) given Australia’s close trade ties with China. China’s Retail Sales rose only 0.2% YoY in April, against expectations of 2% and 1.7% previously. Industrial Production also slowed to 4.1% YoY, below the 5.9% forecast, while Fixed Asset Investment fell 1.6% YoY, compared with expectations for a 1.6% increase.

Despite this backdrop, the Japanese Yen (JPY) remains under pressure against risk-sensitive currencies. Higher Oil prices continue to weigh on the Japanese currency, as Japanese energy importers are forced to sell large amounts of JPY to purchase the US Dollars (USD) needed to pay higher energy bills.

Fiscal concerns in Japan are also adding pressure on the Japanese Yen. According to Reuters, the Japanese government is considering issuing fresh debt to finance an additional budget. This prospect contributed to rising Japanese Bond yields and further weakness in the JPY.

MUFG noted that the combination of higher US yields, the selloff in Japanese Government Bonds (JGB) and new debt issuance continues to favor Japanese Yen weakness. The bank also believes these factors could increase the risk of intervention by Japanese authorities if USD/JPY approaches the 160.00 level again.

Meanwhile, Japanese authorities continue to closely monitor market developments. Japan’s Chief Cabinet Secretary Seiji Kihara said on Monday that the administration is watching market moves, including long-term rates, with “a very high sense of urgency,” while refusing to comment on possible intervention in the foreign exchange market.

Expectations for monetary tightening by the Bank of Japan (BoJ) are nevertheless partially limiting Japanese Yen losses. BoJ board member Kazuyuki Masu recently called for a swift interest rate hike, arguing that inflation risks linked to the war and higher energy prices are becoming more persistent.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD-0.06%-0.21%0.08%-0.06%-0.05%-0.28%-0.12%
EUR0.06%-0.17%0.17%-0.01%-0.01%-0.23%-0.08%
GBP0.21%0.17%0.32%0.15%0.17%-0.06%0.09%
JPY-0.08%-0.17%-0.32%-0.19%-0.16%-0.41%-0.24%
CAD0.06%0.01%-0.15%0.19%0.02%-0.21%-0.06%
AUD0.05%0.01%-0.17%0.16%-0.02%-0.22%-0.04%
NZD0.28%0.23%0.06%0.41%0.21%0.22%0.16%
CHF0.12%0.08%-0.09%0.24%0.06%0.04%-0.16%

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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

Author

Ghiles Guezout

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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