AUD/JPY holds position around a major level ahead of Australian PMI data
|- AUD/JPY gains ground with no significant geopolitical developments over the weekend.
- US Secretary of State Antony Blinken called for calm after an Iranian official stated no immediate plan for retaliation.
- The Japanese Yen faces challenges as BoJ Governor Kazuo Ueda advocated to maintain the loose monetary policy.
AUD/JPY snapped its two-day losing streak on Monday as risk-on sentiment returned, with no significant geopolitical developments over the weekend. Antony Blinken, the US Secretary of State, urged for calm after an Iranian official stated that there was no immediate plan for retaliation to the reported Israeli missile strike. Blinken made these remarks while addressing the press on Friday after the G7 meeting of foreign ministers in Capri, Italy, as reported by "The Guardian".
The Australian Dollar (AUD) edges higher alongside the higher domestic equity market. The ASX 200 Index gained ground for the second consecutive session on Monday, with the increase in metals prices, including Iron Ore, Copper, and Gold. These movements coincide with a reduction in geopolitical tensions in the Middle East, which has uplifted market sentiment.
The Japanese Yen (JPY) encounters obstacles following dovish remarks from Bank of Japan (BoJ) Governor Kazuo Ueda during a seminar hosted by the Peterson Institute for International Economics on Friday, as per Reuters’ report. Ueda stated that the BoJ must sustain loose monetary policy for the foreseeable future as underlying inflation remains "somewhat below" its 2% target, and long-term inflation expectations are still close to 1.5%. He also indicated that the Japanese central bank is "very likely" to raise interest rates if underlying inflation continues to rise and may commence reducing its bond-buying in the future, although the timing remains undecided.
Daily Digest Market Movers: AUD/JPY appreciates on risk-on sentiment
- On Monday, the People's Bank of China maintained its Loan Prime Rates (LPR) at 3.45%. The LPR functions as a benchmark rate for Chinese banks in setting interest rates for loans extended to their clients. This decision could potentially influence the Australian market, given the close trade relationship between the two countries.
- The Chinese Ministry of Commerce has announced a new tariff on US goods. Specifically, China has imposed a duty of 43.5% on imports of propionic acid from the United States. This chemical is extensively utilized in various sectors, including food, feed, pesticides, and medical applications, as per Reuters report.
- 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.
- On Thursday, Bank of Japan board member Asahi Noguchi stated 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.
- According to a Westpac report, while the RBA signaled that rates are unlikely to be raised further, greater confidence in the inflation outlook is required before contemplating the possibility of rate cuts.
- Traders are expected to closely monitor upcoming Purchasing Managers Index (PMI) and Consumer Price Index (CPI) data from Australia on Tuesday and Wednesday, respectively.
Technical Analysis: AUD/JPY around the major level of 99.50
The AUD/JPY traded around 99.70 on Monday. The breakthrough above the significant support level of 99.65, coupled with the 14-day Relative Strength Index (RSI) persisting above the 50 level, indicates an evolving bullish sentiment for the pair. The psychological level of 100.00 appears as the barrier, following the major level of 100.50 and April’s high of 100.81.
On the downside, the AUD/JPY cross could find immediate support at the psychological level of 99.50. A break below this level could lead the pair to approach the psychological level of 99.00. A break below this level could push the pair to navigate the region around the 50-day Exponential Moving Average (EMA) at 98.67 and a major level of 98.50.
AUD/JPY: Daily Chart
Australian Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.04% | 0.18% | -0.01% | -0.03% | -0.01% | -0.10% | -0.03% | |
| EUR | -0.04% | 0.14% | -0.05% | -0.06% | -0.05% | -0.13% | -0.06% | |
| GBP | -0.18% | -0.14% | -0.19% | -0.20% | -0.19% | -0.28% | -0.21% | |
| CAD | 0.01% | 0.05% | 0.18% | -0.01% | -0.01% | -0.09% | -0.02% | |
| AUD | 0.03% | 0.06% | 0.20% | 0.01% | 0.00% | -0.07% | 0.00% | |
| JPY | 0.01% | 0.06% | 0.19% | 0.00% | 0.00% | -0.08% | -0.01% | |
| NZD | 0.09% | 0.14% | 0.26% | 0.09% | 0.08% | 0.08% | 0.07% | |
| CHF | 0.03% | 0.06% | 0.20% | 0.02% | 0.01% | 0.01% | -0.06% |
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.
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