Australian Dollar/Japanese Yen: A Tight Race Near 98.50 Amid Policy Uncertainty

The AUD/JPY cross has settled around 98.50 in the latest Asian trading session, reflecting a delicate balance between Australian foreign inflows and Japanese yen strength. Market participants are closely tracking the Reserve Bank of Australia’s (RBA) policy tone, while the Bank of Japan (BoJ) board member, Naoki Tamura, has signaled a cautious stance that could keep the yen buoyant.

Key Drivers

  1. Foreign Inflows Supporting the AUD
    The Australian dollar has rebounded from a recent dip thanks to steady foreign capital inflows. These flows are largely driven by market expectations that the RBA may begin easing rates in the coming months. The S&P/ASX 200 has risen by 0.86%, buoyed by gains in the financial, real estate, and gold sectors, further underpinning the AUD’s momentum.

  2. RBA’s Cautious Policy Outlook
    RBA Governor Michele Bullock’s remarks indicate a measured approach to future rate cuts, citing inflationary pressures that may exceed forecasts in the third quarter. This cautious narrative has prevented the AUD from accelerating beyond the 98.50 corridor and has kept the 99.50 upside barrier firmly in sight.

  3. Japanese Yen Resilience
    The yen has gained traction amid renewed trade tensions between the United States and China, as well as ongoing geopolitical friction. BoJ board member Naoki Tamura’s upcoming speech is expected to reinforce the yen’s safe‑haven status, limiting upside pressure on the AUD/JPY pair.

  4. Labor Market Pressure in Australia
    A sharp rise in Australia’s September unemployment rate to 4.5%—the highest in four years—has weighed on the AUD early in the session, pulling the cross below 98.00 temporarily. The data has reinforced concerns that wage growth may not keep pace with inflation, tempering expectations of aggressive RBA easing.

Technical Landscape

  • The pair has tested the 98.50 level multiple times, now holding near that figure as the 99.50 resistance looms.
  • The Relative Strength Index (RSI) is in the over‑bought zone, suggesting that any continued rally could face immediate retracement.
  • Key support lies around 99.16, with a stronger barrier at 100.95–101.00 that could cap a swift move toward the 52‑week high of 102.385.

Forward Outlook

  • Short‑term: The AUD/JPY is likely to consolidate around 98.50 until the RBA’s policy path is clarified. Any hint of a rate cut could lift the AUD, while a stronger BoJ signal may reinforce the yen.
  • Medium‑term: Should Australian inflation remain stubbornly high, the RBA may delay easing, keeping the AUD subdued. Conversely, a slowdown in the yen’s safe‑haven appeal could allow the AUD to push toward the 99.50 resistance and beyond.
  • Long‑term: The 52‑week high of 102.385 remains a distant target. Sustained inflows and a more dovish RBA stance would be necessary to breach that ceiling.

In summary, the AUD/JPY pair remains in a tight corridor dictated by policy ambiguity and geopolitical risk. Traders will watch the RBA’s forthcoming remarks and the BoJ’s tone for clues on whether the AUD can break through its current ceiling or will be kept in check by a resilient yen.