AUD/JPY extends losses after Japan CPI figures amid dovish RBA’s outlook
- AUD/JPY depreciates after the release of Japan’s inflation figures released on Friday.
- The Japanese Yen gains support from the hawkish remarks made by BoJ Governor Kazuo Ueda on Thursday.
- The Australian Dollar loses ground as soft domestic jobs data reinforced a dovish outlook on RBA’s monetary policy.
AUD/JPY continues to decline for the second consecutive session following the release of Japan's inflation data on Friday. The National Consumer Price Index (CPI) for March rose by 2.7% year-over-year, compared to a 2.8% increase in February, according to the latest data from the Japan Statistics Bureau. This index assesses the price fluctuations of goods and services bought by households.
The Japanese Yen (JPY) receives upward support from the hawkish remarks made by Bank of Japan’s (BoJ) Governor Kazuo Ueda on Thursday. According to a Reuters report, Ueda mentioned in a press conference that the central bank might consider raising interest rates again if significant declines in the Yen substantially boost inflation. This underscores the influence that currency movements could have on the timing of the next policy shift.
The Australian Dollar (AUD) experienced losses, along with a decline in the ASX 200 Index on Friday. Additionally, Australia’s 10-year government bond yield dropped below 4.3%, stepping back from over four-month highs. This retreat was attributed to soft domestic jobs data, which reinforced a dovish outlook on the Reserve Bank of Australia’s (RBA) monetary policy.
Daily Digest Market Movers: AUD/JPY depreciates on dovish RBA’s outlook
- Japan’s National CPI, excluding fresh food but including fuel costs, increased 2.6% year-over-year in February, decelerating from a four-month high of 2.8% in January and falling below forecasts of 2.7%. The slowdown was attributed to mild increases in food prices, although it remained above the Bank of Japan’s 2% target due to the weakness of the Yen and high commodity prices.
- Bank of Japan board member Asahi Noguchi stated on Thursday that the pace of future rate hikes would probably be much slower than that of its global counterparts in recent policy tightening. This is because the impact of rising domestic wages has yet to be fully transmitted to prices, as reported by Reuters.
- Analysts at Rabobank suggested that stronger Japanese economic data, coupled with stronger expectations that the Bank of Japan (BoJ) may raise rates again later this year, would likely provide the Japanese Yen (JPY) with broad-based strength. They posit that if Japanese real household incomes turn positive later this year, there is a possibility of another BoJ rate hike.
- On Thursday, Australia’s Employment Change posted a reading of -6.6K for March, against the expected 7.2K and 117.6K prior. Australia’s Unemployment Rate rose to 3.8% in March, lower than the expected 3.9% but higher than the previous reading of 3.7%.
- According to a Westpac report, while the central bank signaled that rates are unlikely to be raised further, it requires greater confidence in the inflation outlook before contemplating the possibility of rate cuts.
Technical Analysis: AUD/JPY drops to the support level of 98.00
The AUD/JPY trades around 98.20 on Friday. The breach below the significant support level of 98.65, coupled with the 14-day Relative Strength Index (RSI) persisting below the 50 level, indicates a bearish sentiment for the pair. The AUD/JPY cross could find immediate support at the psychological level of 98.00. A break below this level could lead the pair to approach the major level of 97.50. On the upside, the major level of 98.50 appears as the barrier, followed by the 50-day Exponential Moving Average (EMA). A breakthrough above the latter could support the AUD/JPY cross to explore the region around the psychological level of 99.00.
AUD/JPY: Daily Chart
Australian Dollar price today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.20% | 0.24% | 0.14% | 0.69% | -0.27% | 0.57% | -0.52% | |
| EUR | -0.20% | 0.04% | -0.05% | 0.49% | -0.41% | 0.37% | -0.71% | |
| GBP | -0.24% | -0.04% | -0.10% | 0.45% | -0.50% | 0.33% | -0.76% | |
| CAD | -0.14% | 0.06% | 0.09% | 0.55% | -0.40% | 0.43% | -0.66% | |
| AUD | -0.69% | -0.49% | -0.45% | -0.56% | -0.96% | -0.12% | -1.27% | |
| JPY | 0.22% | 0.44% | 0.45% | 0.36% | 0.92% | 0.79% | -0.29% | |
| NZD | -0.57% | -0.38% | -0.33% | -0.43% | 0.12% | -0.80% | -1.07% | |
| CHF | 0.52% | 0.72% | 0.75% | 0.66% | 1.20% | 0.26% | 1.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.