The AUD/JPY cross trades in positive territory near 114.45 during the early European trading hours on Thursday.
The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) as hotter-than-expected Australian Consumer Price Index (CPI) inflation data has bolstered market expectations for a Reserve Bank of Australia (RBA) interest rate hike
Traders are repricing the risk of a fourth rate increase from the Australian central bank this year, with a move in September now priced at 38%, up from just 17% before, according to Reuters. They are now fully expecting a rate hike by February next year. Data released by the Australian Bureau of Statistics showed on Wednesday that the monthly CPI climbed 1.0% in July, versus a decline of 0.1% in June, exceeding forecasts of a 0.8% rise.
Bank of Japan (BoJ) Deputy Governor Ryozo Himino on Thursday emphasized the need for timely interest rate hikes with a focus on mounting inflation risks, adding that dominant market expectations for a near-term increase in borrowing costs. However, Himino refrained from giving explicit signals on the timing of the next rate increase, saying only that “in-depth deliberations” on price pressures should be held at each policy meeting. Japan intervention fears and BoJ hike prospects keep JPY supported Rabobank’s FX strategists argue that the policy mix in Japan remains central to the Yen outlook.