The AUD/JPY pair continued its upward momentum for the second consecutive day, trading around 94.20 during Monday’s Asian session. The Australian Dollar (AUD) strengthened against its peers following the release of China’s latest economic data, while improving risk sentiment weighed on the safe-haven Japanese Yen (JPY).
Chinese Economic Data Lifts AUD
China’s retail sales rose by 4% year-over-year in January-February, up from December’s 3.7% growth. Industrial production also exceeded expectations, increasing 5.9% YoY, although slightly below the previous reading of 6.2%. These figures, along with China’s recently announced stimulus plan, boosted investor confidence and supported the Australian Dollar, given Australia’s close trade ties with China.
China’s action plan to revive domestic consumption—featuring wage increases, boosted household spending, and stabilization of stock and real estate markets—further strengthened the AUD.
BoJ Policy Expectations May Cap AUD/JPY Gains
Despite the rally, the AUD/JPY pair could face resistance as expectations build around the Bank of Japan (BoJ) continuing its rate-hiking cycle this year. Although the central bank is expected to maintain its policy stance at Wednesday’s meeting, recent wage hikes across major Japanese firms signal stronger inflationary pressures.
Last week, Japanese corporations agreed to significant wage increases for a third consecutive year to counter inflation and labor shortages. Rising wages are expected to fuel consumer spending and inflation, potentially giving the BoJ more room for future rate hikes—supporting the JPY and limiting AUD/JPY’s upside potential.
Market Outlook
Traders will closely watch developments in China’s stimulus implementation and BoJ’s policy stance for further direction. While the AUD benefits from risk-on sentiment and China’s economic measures, any signs of hawkishness from the BoJ could slow down the pair’s gains in the near term.
Related Topics:
