- The AUD/JPY is experiencing continued buying on Tuesday, showing minimal reaction to the RBA's decision.
- The Reserve Bank of Australia opted to keep its benchmark interest rates steady while maintaining a hawkish stance.
- Expectations for another rate hike by the Bank of Japan in 2024 are helping to limit JPY losses, which may constrain further gains for the AUD/JPY cross.
The AUD/JPY cross is showing a slight positive bias during the Asian session on Tuesday, rising to a three-week high in the 98.75-98.80 range following the Reserve Bank of Australia's (RBA) policy announcement. Spot prices are now positioned to extend their upward movement beyond the 50-day Simple Moving Average (SMA).
As widely anticipated, the RBA decided to maintain its Official Cash Rate (OCR) at 4.35% for the seventh consecutive meeting during its September policy meeting. The accompanying statement reaffirmed the RBA's hawkish stance, emphasizing that policy will need to remain sufficiently restrictive until there is confidence that inflation is sustainably moving toward the target range. This, combined with the People's Bank of China's (PBOC) unexpected decision on Monday to lower its 14-day repo rate by 10 basis points to support economic recovery, continues to bolster the Australian Dollar (AUD) and provide support for the AUD/JPY cross.
Additionally, the prevailing bullish sentiment in global financial markets is diminishing the safe-haven appeal of the Japanese Yen (JPY), further benefiting spot prices. However, increasing expectations that the Bank of Japan (BoJ) will raise interest rates by the end of this year—supported by last week's data showing Japan's core inflation rising for the fourth consecutive month—should help limit JPY losses. Furthermore, ongoing geopolitical risks may also act to cap gains for the AUD/JPY cross.
