During Monday’s European session, the AUD/JPY pair continued its upward trajectory, nearing the 99.90 mark. The Australian Dollar (AUD) saw appreciation, bolstered by gains in the domestic equity market, particularly driven by a surge in tech stocks, which propelled the ASX 200 Index upward.
Contributing to the AUD’s strength, Australia’s 10-year government bond yield surged to over one-month highs, reaching approximately 4.1%. This surge followed a rally in US bond yields prompted by robust US jobs data, sparking speculation that the Federal Reserve may uphold higher interest rates for an extended duration.
Investor sentiment regarding interest rate adjustments by the Reserve Bank of Australia (RBA) throughout 2024 has shifted towards skepticism, buoyed by positive data from the US suggesting prolonged elevated borrowing costs in the world’s largest economy.
Despite previous downward pressure on the AUD due to unchanged Final Retail Sales and unfavorable Trade Balance data from Australia, market participants are closely monitoring copper and oil prices, as further appreciation could potentially bolster the AUD, thus supporting the AUD/JPY cross.
Meanwhile, the Japanese Yen (JPY) faces downward pressure as the Bank of Japan (BoJ) maintains a cautious stance on further policy tightening. Additionally, reduced geopolitical tensions in the Middle East, evidenced by Israel’s withdrawal of additional troops from Southern Gaza, have contributed to a decrease in the appeal of the safe-haven JPY.
Earlier on Monday, Bank of Japan (BoJ) Governor Kazuo Ueda expressed his intention to streamline and enhance the clarity of the central bank‘s policy framework, provided economic conditions permit. Governor Ueda’s remarks came as he reflected on his tenure approximately a year after assuming the post.
