AUD/JPY extends losses to near 97.00 on weaker Aussie Exports data

• AUD/JPY has dropped to near 97.00 as Australian exports have declined by 9.9%.
• Aussie Trade Balance has landed at 8,733M vs. the estimates of 14,500M.
• Japan’s stellar performance on the GDP front has strengthened the yen bulls.

The AUD/JPY pair has witnessed a sheer downside after weaker trade data from the Australian Bureau of Statistics. The cross has slipped to near 97.00 as Australian exports have trimmed dramatically. The commodity-linked currency has reported a decline in monthly export data by 9.9% against an expansion of 5.1%. Also, imports have accelerated by 5.2% vs. 0.7% in the prior release. The Trade Balance has trimmed dramatically to 8,733M against the expectation of 14,500M.

Many triggers have strengthened the antipodean against the Japanese yen this week.  First, the Reserve Bank of Australia (RBA) hiked its Official Cash Rate (OCR) to 2.85% after announcing a fourth consecutive 50 basis points interest rate hike. As price pressures in the Australian economy have not displayed any sign of making top yet, RBA Governor Philip Lowe sticks to its ‘restrictive’ stance on interest rates.

In the monetary policy announced, the RBA also dictated the roadmap of scaling down the inflation rate to the desired levels. The guidance on interest rates and inflationary pressures was worth watching. RBA policymakers are expecting that the OCE will escalate further to 3.85%. While the inflation rate will top around 7% and from next year it will start declining. This will undoubtedly widen the RBA-Bank of Japan (BOJ) policy divergence further.

And, then the release of the mixed Gross Domestic Product (GDP) data. Australian GDP data landed at 0.9%, lower than the expectations of 1% but above the prior release of 0.8% on a quarterly basis. However, the annual data has improved to 3.6% against the estimates and the prior print of 3.5% and 3.3% respectively.

Japan’s upbeat GDP data have strengthened the yen bulls on the Tokyo front. The economic data has improved meaningfully to 3.5% against the expectations and the prior print of 2.9% and 2.2% respectively on an annual basis. Also, the quarterly data has been recorded higher at 0.9% against the forecasts of 0.7% and the prior release of 0.5%.