The AUD/JPY currency pair continued its winning streak on Wednesday, climbing to around 101.20 during Asian trading hours. This upside movement is primarily driven by the weakening Japanese Yen (JPY) amid uncertainty over the timing of the Bank of Japan‘s (BoJ) next interest rate hike.
Japan’s Finance Minister Katsunobu Kato addressed the market on Tuesday, stressing the importance of stable currency behavior aligned with economic fundamentals. He indicated heightened vigilance over foreign exchange fluctuations, reinforcing that the Japanese government would take necessary actions to manage excessive forex volatility.
Meanwhile, the Australian Dollar (AUD) held steady following the People’s Bank of China (PBoC) decision to keep its benchmark interest rate unchanged at 3.1% for November. As China is a key trading partner for Australia, the rate decision helps provide some stability for the AUD.
However, Australian Treasurer Jim Chalmers warned of tough economic conditions in his Ministerial Statement on Wednesday, noting the impact of falling iron ore prices and a weakening labor market on government revenues. He also highlighted the broader challenges posed by a slowing Chinese economy, further dampening the country’s fiscal outlook.
Despite the positive momentum in AUD/JPY, the currency pair may face some headwinds. The risk-sensitive Australian Dollar could come under pressure following a significant escalation in the Russia-Ukraine conflict. On Tuesday, Ukraine deployed US-supplied ATACMS missiles on Russian territory for the first time, marking a key development on the 1,000th day of the war. While market concerns eased after Russian Foreign Minister Sergei Lavrov assured that all measures would be taken to prevent nuclear war, geopolitical risks remain a factor.
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