- The Aud/JPY recovers positive traction, although it is still confined in a family range.
- The Aussie bulls reacted little to China’s PMI, which rose to 51.1 in May.
- Divergent policy perspectives of the BOJ and RBA should contribute to limit cash prices.
The Aud/JPY crossing attracts new buyers during Thursday’s Asian session and, for now, seems to have stopped the backward fall of the previous day from the 93.60 area, or the weekly maximum. Cash prices move little after the publication of Chinese data and are currently negotiated around the region of 92.85-92.90, with an increase of 0.20% in the day.
In fact, a private survey showed that China’s service activity expanded at a slightly faster rate in May, with the Caixin Purchase Manager (PMI) index of Caixin Services, going up to 51.1 from 50.7 in April. The data coincided with consensus estimates and failed to provide significant impetus to the Australian dollar (AUD) as Proxy of China. However, the hopes of possible conversations between the president of the US, Donald Trump, and the Chinese president, Xi Jinping, continue to act as a tail wind for the AUSSIE, providing some support to the Aud/JPY crossing.
Meanwhile, a modest increase in the US dollar (USD) exerts some downward pressure on the Japanese yen (JPY), which contributes to the intradic movement. However, the growing acceptance that the Bank of Japan (BOJ) will continue to increase interest rates stops JPY bassists when opening aggressive bets. The bets reaffirmed with data that showed that Japan’s real wages fell for the fourth consecutive month in April in the middle of persistent inflation. This, together with the geopolitical risks, should limit the losses of the JPY and capar the aud/JPY crossing.
Apart from this, the moderate inclination of the Bank of the Australian Reserve (RBA) should contribute to maintaining a limit on the AUD. Even from a technical perspective, the recent price action within a range observed during the last two weeks justifies a certain caution before positioning itself for the next phase of a directional movement. Therefore, a sustained movement and a daily closure are needed above the round figure of 93.00 to support the case of any additional upward uprising movement in the midst of persistent uncertainties related to trade and fears on the commercial war between the US and China.
And in Japanese faqs
The Japanese Yen (JPY) is one of the most negotiated currencies in the world. Its value is determined in general by the march of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of the Japanese and American bonds or the feeling of risk among the operators, among other factors.
One of the mandates of the Bank of Japan is the currency control, so its movements are key to the YEN. The BOJ has intervened directly in the currency markets sometimes, generally to lower the value of YEN, although it abstains often due to the political concerns of its main commercial partners. The current ultralaxy monetary policy of the BOJ, based on mass stimuli to the economy, has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to fight against inflation levels of decades.
The position of the Bank of Japan to maintain an ultralaxa monetary policy has caused an increase in political divergence with other central banks, particularly with the US Federal Reserve. This favors the expansion of the differential between the American and Japanese bonds to 10 years, which favors the dollar against Yen.
The Japanese Yen is usually considered a safe shelter investment. This means that in times of tension in markets, investors are more likely to put their money in the Japanese currency due to their supposed reliability and stability. In turbulent times, the Yen is likely to be revalued in front of other currencies in which it is considered more risky to invest.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
