AUD/JPY drifts lower to near 100.50 amid verbal intervention fears
|- AUD/JPY weakens to around 100.50 in Friday’s Asian session.
- China's economy expanded in the third quarter at the slowest pace since early last year.
- The Japanese Yen edges higher amid FX intervention fears.
The AUD/JPY cross trades on a softer note near 100.50 during the Asian trading hours on Friday. The verbal intervention from Japanese authorities provides some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
China's economy expanded at a slower-than-expected rate of 4.6% YoY in the July-September quarter, compared to the previous reading of 4.7%, the National Bureau of Statistics showed Friday. The figure was slightly better than analysts expected. Meanwhile, the country’s Retail Sales increased by 3.2% YoY in September versus the 2.5% expected, and Industrial Production climbed 5.4% YoY in September from 4.5% in August, stronger than the 4.6% expected.
On Friday, the Chinese authorities stated that they will urge financial institutions to act swiftly in implementing expansive financial policies, and the officials will implement incremental policies following a meeting on October 16. Any further plans from China to boost economic growth could boost the Aussie as China is a major trading partner to Australia.
The verbal intervention from Japanese officials lifts the JPY for the time being. Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs and top foreign exchange official, said on Friday that he will closely monitor the foreign exchange move with a high sense of urgency.
The Bank of Japan (BoJ) is widely expected to keep interest rates unchanged at its October meeting, according to a Reuters poll. A slim majority of economists see the Japanese central bank holding the current rate through the end of December, and nearly 90% of economists expect a hike to 0.5% by the end of March.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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