- AUD/JPY weakens around 100.50 in the Asian session on Friday.
- China’s economy expanded in the third quarter at the slowest pace since early last year.
- The Japanese Yen rises slightly amid fears of intervention in the currency market.
The AUD/JPY cross is trading on a softer note near 100.50 during Asian trading hours on Friday. The verbal intervention from the Japanese authorities provides some support to the Japanese Yen (JPY) against the Australian Dollar (AUD).
China’s economy expanded at a slower-than-expected pace of 4.6% year-on-year in the July-September quarter, compared with the previous reading of 4.7%, the National Bureau of Statistics showed on Friday. The figure was slightly better than analysts expected. Meanwhile, the country’s retail sales rose 3.2% year-on-year in September versus 2.5% expected, and industrial production rose 5.4% year-on-year in September from 4.5% in August, stronger than the 4.6% expected.
On Friday, Chinese authorities stated that they will urge financial institutions to act quickly in implementing expansionary financial policies, and officials will implement incremental policies after a meeting on October 16. Any further plans by China to boost economic growth could benefit the Australian dollar, as China is a major trading partner of Australia.
Verbal intervention from Japanese officials lifts the JPY for the time being. Atsushi Mimura, Japan’s Deputy Finance Minister for International Affairs and top foreign exchange official, said on Friday that he will closely monitor the exchange rate movement with a high sense of urgency.
The Bank of Japan (BoJ) is widely expected to keep interest rates unchanged at its October meeting, according to a Reuters poll. A slim majority of economists expect the Japanese central bank to maintain the current rate until the end of December, and almost 90% of economists expect a rise to 0.5% by the end of March.
The Japanese Yen FAQs
The Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is determined broadly by the performance of the Japanese economy, but more specifically by the policy of the Bank of Japan, the differential between the yields of Japanese and US bonds or the risk sentiment among traders, among other factors.
One of the mandates of the Bank of Japan is currency control, so its movements are key for the Yen. The BoJ has intervened directly in currency markets on occasion, usually to lower the value of the Yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BoJ’s current ultra-loose monetary policy, based on massive stimulus to the economy, has caused the depreciation of the Yen against its main currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat decades-old levels of inflation.
The Bank of Japan’s ultra-loose monetary policy stance has led to increased policy divergence with other central banks, particularly the US Federal Reserve. This favors the widening of the spread between US and Japanese 10-year bonds, which favors the Dollar against the Yen.
The Japanese Yen is often considered a safe haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. In turbulent times, the Yen is likely to appreciate against other currencies that are considered riskier to invest in.
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.
