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AUD/JPY loses ground amid suspected intervention by Japanese authorities

  • AUD/JPY depreciated as JPY continued to gain ground amid possible market intervention by Japanese authorities.
  • Japan’s vice finance minister for international affairs, Masato Kanda declined to comment on whether Japan had intervened in the market.
  • Australian Composite PMI declined in April, indicating a slower pace of growth in private sector output.

AUD/JPY declined as the Japanese Yen (JPY) strengthened on Friday, following a rally on Thursday attributed to potential Japanese government intervention, marking the second such incident this week, according to a Reuters report. Masato Kanda, Japan’s vice finance minister for international affairs, declined to comment on whether Japan had intervened in the market. It is worth noting that Japanese banks will be closed due to Greenery Day on Friday.

On Thursday, the Bank of Japan (BoJ) released Minutes from the March meeting with insights into the monetary policy outlook. One member noted that the economy’s reaction to a short-term rate increase to approximately 0.1% is expected to be minimal. Additionally, several members expressed the opinion that market forces should primarily determine long-term rates.

The Australian Dollar (AUD) may strengthen due to the hawkish sentiment surrounding the Reserve Bank of Australia (RBA). It is widely anticipated that the RBA will maintain its key policy rate at 4.35% for a fourth consecutive meeting on Tuesday, and likely until the end of September, according to a Reuters poll of economists. These economists forecast only one interest rate cut this year. This shift in expectations, from two 25 basis point cuts in an April survey, follows news that inflation declined less than expected in the last quarter and the labor market remains tight.

Daily Digest Market Movers: AUD/JPY depreciates after softer Aussie PMI data

  • The Judo Bank Australia Composite Purchasing Managers Index (PMI) fell to 53.0 in April from 53.3 prior. The Australian private sector output grew slightly slower. Business activity growth was primarily limited to the service sector, as manufacturing output continued to decline. The Services PMI fell to 53.6 from 54.4 in the previous month.
  • The ASX 200 Index advanced on Friday, marking its second consecutive session of gains. The rise followed positive movements on Wall Street overnight, driven by reassurances from the US Federal Reserve that dismissed concerns about another interest rate hike.
  • On Thursday, Australia’s Trade Balance (MoM) showed a surplus but lower than the market expectations in April. Additionally, the Building Permits showed the number of permits for new construction projects rose but fell short of the expectations in March.
  • The Consumer Confidence Index fell to 38.3 in April from 39.5 in March and came below the market expectations of 39.7. This decline marks the lowest level in three months, reflecting weakened sentiment among households.
  • According to Reuters, the Sankei newspaper reported on Tuesday that Japan is considering implementing tax breaks for repatriation of corporate profits into the Yen. This measure may potentially be included in the annual mid-year policy blueprint.

Technical Analysis: AUD/JPY falls to near 100.50 aligned with channel’s lower boundary

The AUD/JPY trades around 100.50 on Friday, testing to break below the lower boundary of the ascending channel. However, the 14-day Relative Strength Index (RSI) is positioned above the 50 level. A further decline could commence the weakening of the bullish bias.

A break below the lower boundary of the ascending channel could lead the AUD/JPY cross to navigate the region around the psychological level of 100.00. A further decline could strengthen the bearish bias and put pressure on the currency cross to reach April’s low at 97.78.

The key resistance is observed at the lower boundary of the wedge around the psychological level of 103.80. A rebound back into the ascending wedge could potentially strengthen the bullish bias and push the AUD/JPY cross toward the psychological level of 105.00, followed by the upper boundary of the wedge.

AUD/JPY: Daily Chart

Japanese Yen price today

The table below shows the percentage change of the Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.

USD   -0.05% -0.13% -0.05% -0.12% -0.18% -0.16% -0.07%
EUR 0.07%   -0.05% 0.01% -0.05% -0.09% -0.06% -0.02%
GBP 0.12% 0.06%   0.08% 0.01% -0.06% -0.03% 0.05%
CAD 0.05% -0.02% -0.07%   -0.06% -0.11% -0.09% -0.02%
AUD 0.12% 0.04% -0.01% 0.06%   -0.05% -0.03% 0.04%
JPY 0.18% 0.08% 0.04% 0.10% 0.04%   0.05% 0.08%
NZD 0.14% 0.07% 0.03% 0.11% 0.04% -0.03%   0.08%
CHF 0.07% 0.02% -0.05% 0.02% -0.05% -0.09% -0.08%  

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).

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 current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.

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 supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

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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