The Australian Dollar (AUD) experienced a notable pullback against the Japanese Yen (JPY) on Monday, retracting its recent gains as market participants weighed the possibility of intervention by Japanese authorities to bolster the Yen. The currency pair, which had been trading with bullish traction, saw a shift in momentum as the AUD lost 0.86% against the JPY today amidst speculation of Tokyo’s stealth moves in the foreign exchange market.
Despite the inherent strengths backed by the hawkish stance of the Reserve Bank of Australia (RBA) following robust CPI inflation data, the AUD faltered in its ascendency as it appraised new dynamics introduced by Japan’s monetary decision-makers. Japan’s Showa Day holiday on Monday meant its markets were closed, yet the undercurrents of interventionist whispers did not cease to influence market sentiments.
The Yen, which had nosedived to multi-decade lows against a basket of currencies, found itself at the epicentre of attention after the Bank of Japan stubbornly held onto its ultra-loose monetary policy settings. This decision came even in the face of mounting concerns over subdued inflation and optimistic cues emanating from equity markets.
Significantly compounding the intrigue was Masato Kanda, Japan’s senior currency official, who refrained from confirming whether the Japanese officials had stepped into the markets in response to the sharp movements observed in their domestic currency. The silence on the matter has only served to fan the flames of speculation, suggesting that Tokyo might indeed have embarked on a strategic intervention.
Meanwhile, Down Under, the Australian Dollar had previously enjoyed an uptrend, drawing strength from revised forecasts by economists who had to gain a new perspective in light of unexpectedly high inflation figures. With the anticipation of the upcoming Retail Sales data, which is pivotal for assessing the impact of consumer spending on inflation and Gross Domestic Product (GDP), markets remain slightly on edge.
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On the trading front, AUD/JPY was last seen hovering around the 102.50 mark on Monday. With the Aussie Dollar strengthening almost 16% against the Yen over the last 12 months, and coming off fresh 5 year highs, it is no surprise to see a slight pullback on the rumours from BoJ.
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