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Australian Dollar weakens after trade deficit, Japanese Yen lifted by intervention risks

  • AUD/JPY weakens after Australia reports an unexpected trade deficit.
  • Australian exports fall sharply in May, pushing the trade balance into deficit.
  • Intervention warnings from Japanese authorities continue to support the Japanese Yen.

AUD/JPY declines by 0.61% on Thursday, trading around 111.40 at the time of writing. The Australian Dollar (AUD) comes under pressure after trade data missed expectations by a wide margin, while the Japanese Yen (JPY) remains supported by speculation over a potential intervention from Japanese authorities.

According to the Australian Bureau of Statistics, Australia's Trade Balance shifted to a deficit of A$3.018B in May, following a revised surplus of A$1.383B in April. Markets had expected another surplus of A$2.2B. The deterioration was mainly driven by a 6.9% monthly decline in exports, while imports increased by 2.6%.

The weak trade figures add to concerns about Australia's economic outlook. Commerzbank also believes markets are overestimating the chances of another Reserve Bank of Australia (RBA) rate hike this year. The bank argues that falling Oil prices have reduced upside inflation risks, while the accelerating decline in housing prices could weigh on consumer spending. According to Commerzbank, inflation would need to rise significantly to justify further monetary tightening, a scenario it does not expect.

On the Japanese side, the Japanese Yen continues to draw support from expectations that the Bank of Japan (BoJ) will further normalize its monetary policy following its June rate hike. Toshihiro Nagahama, a member of Prime Minister Takaichi's Council on Economic and Fiscal Policy, said he expects another rate increase before the end of the year, although this outcome is already largely priced in by markets.

Traders also remain alert to the possibility of foreign exchange intervention. Japanese Finance Minister Satsuki Katayama recently reiterated that authorities stand ready to respond at any time to excessive currency moves, while the Ministry of Finance declined to comment on the recent sharp swings in the Japanese Yen. These intervention concerns continue to limit AUD/JPY's upside despite the interest rate differential that remains supportive of carry trades.

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 US Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-0.74%-0.74%-1.17%-0.38%-0.66%-0.77%-0.98%
EUR0.74%0.00%-0.44%0.35%0.09%-0.01%-0.24%
GBP0.74%-0.01%-0.43%0.32%0.08%-0.00%-0.24%
JPY1.17%0.44%0.43%0.77%0.51%0.38%0.19%
CAD0.38%-0.35%-0.32%-0.77%-0.27%-0.36%-0.59%
AUD0.66%-0.09%-0.08%-0.51%0.27%-0.09%-0.32%
NZD0.77%0.01%0.00%-0.38%0.36%0.09%-0.23%
CHF0.98%0.24%0.24%-0.19%0.59%0.32%0.23%

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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