AUD/JPY plunges to three-week lows below 97.00 following RBA decision to hold interest rate

• AUD/JPY retreats for the second day in a row, dipping to three-week lows on Tuesday.
• The RBA decided to leave its benchmark interest rate unchanged, as expected.
• The monetary policy statement accompanying the decision weighs on the Australian dollar in a context of general relaxation of the risk tone.

AUD/JPY remains under some selling pressure for the second day in a row on Tuesday and hits a three-week low during the Asian session at 96.72. The bearish trajectory picked up after the Reserve Bank of Australia (RBA) announced its monetary policy decision and dragged prices below the 97.00 signal.

As expected, the Australian central bank decided to leave the Official Cash Rate unchanged at the end of the December meeting. In the monetary policy statement accompanying the meeting, the RBA noted that the monthly CPI indicator for October suggested that inflation was continuing to moderate and that labor market conditions, while still tense, were also continuing to gradually ease. This suggested further rate hikes could be ruled out and sparked fresh selling around the Australian Dollar (AUD) despite RBA Governor Michele Bullock’s statement that incoming data will determine whether further tightening is necessary in the coming years. meetings.

The Japanese Yen (JPY), for its part, is supported by the growing market conviction that the Bank of Japan (BoJ) will begin to tighten its ultra-loose policy and end its yield curve control measures during the first months of 2024. Apart from this, the risk aversion momentum, represented by a generally weaker tone around the equity markets, is seen as another factor benefiting the relative safe haven status of the Yen against the Australian Dollar, perceived as more risky. This further contributes to the tone offered around the AUD/JPY cross.

AUD/JPY Technical Levels