The Australian Dollar gains against the Yen amid unchanged Chinese rates and divergent central bank policies between RBA and BoJ.
The AUD/JPY pair rose to 113.60 during European trading hours, recovering from two days of losses. The move follows the People’s Bank of China’s decision to hold its Loan Prime Rates steady at 3.00% for the one-year and 3.50% for the five-year tenor, supporting the Australian Dollar given strong trade ties between Australia and China.
Markets continue to price a 70% chance of one final RBA rate hike by December, though expectations for further tightening remain subdued. The RBA has adopted a cautious stance, monitoring the impact of prior hikes on core inflation and economic cooling. Meanwhile, the Bank of Japan’s ultra-loose policy contrasts sharply, reinforcing the yield differential driving the cross higher.
Sentiment is tempered by warnings from Japanese officials, including Finance Minister Satsuki Katayama, who signaled readiness for FX intervention if needed. The BoJ’s June rate hike, which lifted borrowing costs, has done little to narrow the gap with the RBA’s more restrictive stance.