During Tuesday’s European session, the AUD/JPY pair maintained its upward trajectory, nearing the 100.30 mark. The Japanese Yen (JPY) remained subdued, influenced by the Bank of Japan‘s (BoJ) cautious stance amidst uncertain prospects for future rate hikes.
The persistent gap between Australian and Japanese interest rates offers potential upward support for the AUD/JPY pair. Investor sentiment is swayed by skepticism regarding the necessity of interest rate cuts by the Reserve Bank of Australia (RBA) in 2024. Positive US data has contributed to expectations that the Federal Reserve (Fed) might prolong its higher interest rate stance.
However, investors remain watchful amid the likelihood of Japanese authorities intervening in the market to prevent a significant decline in the domestic currency. BoJ Governor Kazuo Ueda continues to focus on inflation and policy outlook, anticipating a gradual acceleration in inflation. Monitoring data and developments is crucial to assess the realization of this scenario.
Governor Ueda emphasized the importance of monitoring annual wage talks for potential pay hikes and subsequent impacts on service prices. A sustained acceleration towards the 2% inflation target could facilitate a reduction in monetary stimulus measures.
Despite subdued Westpac Consumer Confidence data, the Australian Dollar (AUD) persists in its advance against the Japanese Yen. This resilience is bolstered by a robust domestic equity market, as reflected in gains anticipated for the ASX 200 Index. Investor attention remains attuned to the Reserve Bank of Australia’s interest rate deliberations, underpinning AUD’s strength.
