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Australian Dollar rises vs Japanese Yen on diverging RBA, BoJ policy outlooks

  • The Australian Dollar benefits from growing expectations of another interest rate hike in Australia next week.
  • The Japanese Yen remains weighed down by uncertainty surrounding the pace of monetary tightening in Japan.
  • Investors now await Australian employment data and fresh comments from Michele Bullock.

AUD/JPY advances on Monday and trades around 112.10 at the time of writing, up 0.32% on the day. The Australian Dollar (AUD) benefits from strengthening expectations that the Reserve Bank of Australia (RBA) will raise interest rates again, while the Japanese Yen (JPY) remains under pressure following cautious signals from the Bank of Japan (BoJ).

Financial markets are becoming increasingly confident that the RBA will raise interest rates again at its monetary policy meeting next week. The Australian central bank has already increased its Official Cash Rate (OCR) by 75 basis points (bps) this year to 4.35%, as persistent inflationary pressures continue to raise concerns.

RBA Governor Michele Bullock reinforced this view last week during an appearance before the Parliamentary Treasury Committee. Bullock warned that inflation risks remain tilted to the upside and said the key question is whether the monetary tightening delivered so far will be sufficient to return inflation to target within a reasonable timeframe.

Bullock is scheduled to speak again on Tuesday during a fireside chat in Sydney. Her comments will be closely watched for fresh clues about next week's policy meeting and the possibility of further monetary tightening. Attention will then turn to Australia's employment report on Thursday. Further signs of resilience in the labor market could strengthen expectations of tighter monetary policy and continue to support the Australian Dollar.

External developments could also influence the Aussie. United States (US) President Donald Trump and Chinese President Xi Jinping are scheduled to meet in Washington on Thursday to discuss the US-China tariff truce. Developments in trade relations with China remain particularly relevant for the Australian Dollar given the close economic ties between Australia and China.

On the Japanese side, the Yen remains under pressure following the BoJ's monetary policy decision on Friday. The central bank raised its policy rate by 25 bps to 1.25%, its highest level in 31 years, while BoJ Governor Kazuo Ueda left the door open to further rate hikes if economic activity and prices evolve in line with expectations.

However, two members of the policy board called for greater patience before further increases in borrowing costs. These divisions are raising questions about how quickly the BoJ can continue normalizing monetary policy and are limiting support for the Japanese Yen for now.

The combination of stronger monetary tightening expectations in Australia and a more measured approach in Japan is therefore reinforcing the prospect of policy divergence between the two central banks, supporting AUD/JPY at the start of the week.

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
USD0.01%0.07%0.20%0.22%-0.06%-0.09%0.10%
EUR-0.01%-0.00%0.16%0.13%-0.13%-0.20%0.03%
GBP-0.07%0.00%0.15%0.17%-0.12%-0.19%0.05%
JPY-0.20%-0.16%-0.15%-0.01%-0.32%-0.30%-0.08%
CAD-0.22%-0.13%-0.17%0.00%-0.31%-0.31%-0.09%
AUD0.06%0.13%0.12%0.32%0.31%-0.02%0.19%
NZD0.09%0.20%0.19%0.30%0.31%0.02%0.21%
CHF-0.10%-0.03%-0.05%0.08%0.09%-0.19%-0.21%

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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