- The Aud/JPY gains strength about 94.30 in the first bars of the European session on Wednesday, rising 0.33% in the day.
- The demand for safe refuge in recoil continues to weigh on the Japanese yen.
- Australia’s monthly CPC rose 2.1% year -on -year in May, softer than expected.
The Aud/JPY pair attracts some buyers around 94.30 during the early European session on Wednesday. The Japanese Yen (JPY) weakens in front of the euro (EUR) due to the growing optimism that a high fire between Israel and Iran will remain after it was promoted by the president of the USA Donald Trump.
The high fire between Israel and Iran entered into force on Tuesday and seems to be maintained at the moment, despite an Israeli attack in Tehran and an Iranian missile attack. The broken tensions in the Middle East could undermine the JPY and create a tail wind for the crossing in the short term.
However, Israeli Prime Minister Benjamin Netanyahu warned that Israel “will attack” if they will “think about rebuilding” its nuclear program. Any sign of a new climbing could boost safe refuge flows and benefit the JPY.
The data published by the Australian Statistics Office (ABS) on Wednesday showed that the monthly consumer price index (CPI) rose 2.1% year -on -year in May compared to the previous 2.4%. This figure was softer than the expectation of a 2.3% growth in the reported period.
The softer Australian CPI inflation and the weakest reports of the gross domestic product (GDP) reinforce the expectations of a rate cut by the Bank of the Australian Reserve (RBA) in July. This, in turn, could drag Aussie down against JPY. Financial markets have discounted almost 80% probability of a rate cut of 25 basic points (PB) by the RBA at the July meeting.
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.
