The AUD/JPY currency pair has steadied after a six-day downturn, hovering around 0.6920 during Asian trading hours on Wednesday. The Australian dollar (AUD) sees some fluctuations as the market digests the latest Consumer Price Index (CPI) statistics from Australia.
In May, Australia’s inflation rate decelerated more than analysts had anticipated, providing some comfort to policymakers. According to the Australian Bureau of Statistics, the annual CPI increased by 4.0%, a slight decrease from the previous month’s 4.2% and below the expected 4.4%. Interestingly, on a monthly basis, consumer prices fell by 0.7%, marking a significant reversal from the prior month’s 0.4% rise and landing below the expected 0.3% decline. Additionally, the trimmed average CPI, the core inflation gauge recommended by the Reserve Bank of Australia (RBA), rose by 0.4% for the month and 3.6% year-on-year.
On the Japanese front, officials are issuing heightened warnings to mitigate the depreciation of the yen, with increasing calls for tighter monetary policy. Minoru Kihara, Japan’s Chief Cabinet Secretary, stated that the government is prepared to act against excessive fluctuations in the currency if needed. This position was emphasized during recent discussions between Japan’s Finance Minister Satsuki Katayama and the U.S. Treasury Secretary Scott Bessent, leaving the markets vigilant for any official yen-buying measures.
The Bank of Japan’s (BOJ) summary from the June meeting indicated that most board members favored increasing the policy rate, citing concerns over rising inflation risks and the underlying CPI’s proximity to the 2% target.
Consequently, the positive outlook for the AUD/JPY pairing seems tightly restrained. The combination of low inflation figures in Australia, which reduces the urgency for the RBA to hike rates, coupled with growing fears of direct forex intervention by Japanese authorities, has made traders particularly cautious with currency pairs.
