The AUD/JPY pair moved higher to around 96.70 on Thursday, reversing a two-day losing streak as the Japanese Yen (JPY) weakened following the Bank of Japan’s (BoJ) policy announcements.
As anticipated, the BoJ maintained its short-term policy rate in the range of 0.15%-0.25% after concluding its two-day policy meeting. The BoJ’s policy statement indicated that Japan’s economy is modestly recovering, though it faces certain vulnerabilities. Inflation expectations are also rising slightly, yet uncertainty regarding Japan’s economic and pricing outlook remains significant. The central bank will monitor whether the momentum of wage hikes continues into next year, especially as smaller firms have faced challenges in passing on higher costs to consumers.
Later in the day, investors are likely to closely follow BoJ Governor Kazuo Ueda’s speech for any new insights on Japan’s economic trajectory.
Meanwhile, rising expectations that the Reserve Bank of Australia (RBA) could cut interest rates sooner than anticipated are putting downward pressure on the Australian Dollar (AUD). Gareth Aird, head of Australian economics at CBA, forecasted a potential rate cut by the RBA in February, citing the central bank’s clear shift toward a more dovish stance.
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