During the European session on Friday, the AUD/JPY pair soared to an unprecedented high near 99.00, extending its winning streak that began on February 14. The surge is attributed to growing concerns among market participants regarding a potential delay in the Bank of Japan‘s (BoJ) plan to exit from negative interest rates, particularly following last week’s data revealing a technical recession in the Japanese economy. The resulting downward pressure on the Japanese Yen (JPY) has bolstered the AUD/JPY cross.
Compounding the Yen’s depreciation, global money markets are experiencing an upswing as investors come to terms with dashed hopes for interest rate cuts by major central banks worldwide. This trend exerts additional downward pressure on the safe-haven Japanese Yen, while Australia’s S&P/ASX 200 index’s upward movement, following the overnight surge on Wall Street, lends support to the Australian Dollar (AUD). This confluence of factors contributes to the ongoing strength of the AUD/JPY cross.
Investors continue to leverage the Japanese Yen to invest in higher-yielding assets denominated in other currencies. However, recent verbal intervention by Japanese authorities, including Vice Finance Minister for International Affairs Masato Kanda’s statement last week, indicating readiness to take necessary actions, may provide some support for the JPY.
Earlier this week, positive Trade Balance figures from the Ministry of Finance of Japan boosted the Japanese Yen. Attention now turns to the upcoming release of Japan’s National Consumer Price Index (CPI) data scheduled for Tuesday, as market participants eagerly await further insights.
On the Australian front, the AUD received a lift from domestic PMI data signaling a return to growth in private sector activity in February, marking the first positive growth in five months, primarily driven by a robust expansion in the services sector. Additionally, market sentiment favoring the likelihood of no immediate rate cuts, following the Reserve Bank of Australia‘s (RBA) recent Meeting Minutes, further buoyed the Aussie Dollar.
