The AUD/JPY pair currently exhibits a bullish bias, buoyed by expectations for Australian interest rate hikes.
Key drivers include:
- Interest rate differential: The Reserve Bank of Australia is expected to raise its rate to 3.85% soon, while the Bank of Japan’s recent hike to 0.75% remains low.
- A positive economic outlook for Australia supports the AUD, linked to rising commodity prices.
- Japan's inflation is above target, which pressures the BOJ to consider further rate adjustments.
In the near term, the AUD/JPY is likely to trade around recent highs, remaining above its 3-month average. The pair recently fluctuated by 8.3%, indicating volatility.
Upside risks include aggressive monetary policy adjustments from the RBA, while downside risks stem from potential yen interventions by Japanese authorities to stabilize the currency amidst rising import costs.