AUD/JPY dynamics amid the Bank of Japan’s policy shift

The Australian Dollar against the Japanese Yen (AUD/JPY) has shown a clear, sustained move above the 103‑level during the most recent trading sessions, a development that has been closely linked to the Bank of Japan’s (BoJ) latest policy announcement.

BoJ raises short‑term rate to 0.75 %

On Friday, the BoJ increased its short‑term policy rate by 25 basis points, lifting the benchmark to 0.75 %—the highest level in thirty years. The decision, made unanimously by the board, signals the bank’s commitment to a gradual path of policy normalization, a theme that was also reinforced in the statement released at the end of the week. The BoJ reiterated that it will keep real interest rates low for the foreseeable future but will remain open to further rate increases should economic activity and price growth stay in line with its forecasts.

The rate hike had an immediate, measurable impact on the currency market: the Yen weakened against the Australian Dollar, pushing the AUD/JPY pair into the 103‑area for the third straight session. The cross has been trading around 103.00 during Asian hours on Friday, maintaining momentum that has been built over several days.

Technical backdrop

While the pair has moved above 103, it also remains firmly supported by its 100‑day exponential moving average (EMA), which sits at 99.44. Even as the pair dipped to 102.70 during the early European session on Thursday, the EMA has acted as a buffer, preventing a deeper retracement and preserving the broader uptrend. Technical analysts have therefore maintained a “buy‑the‑dip” bias, noting that the daily slope of the EMA is still positive, a key indicator that the trend remains bullish.

Market context

The AUD/JPY performance must be viewed against the backdrop of recent market expectations. Leading up to the BoJ meeting, traders had already priced in a 0.75 % rate target, so the actual announcement was largely a confirmation rather than a surprise. Consequently, the market’s reaction—particularly the yen’s depreciation—was muted compared to a scenario where the rate hike had been unexpected. This muted reaction has helped preserve the pair’s momentum and supports the view that the BoJ’s policy trajectory is now clearer.

Key takeaways for traders

  • Policy direction is clear: The BoJ has signaled a willingness to continue raising rates if the economy and inflation remain on track, implying potential further upward pressure on the yen.
  • Technical support remains intact: The 100‑day EMA at 99.44 continues to act as a strong floor for the pair.
  • Volatility may persist: While the yen has weakened, the AUD/JPY has shown resilience. Traders should monitor the 103‑level as a potential short‑term resistance if the pair moves higher.
  • Macro‑factors are pivotal: Any change in the BoJ’s outlook or in global interest‑rate expectations can quickly alter the pair’s trajectory.

In sum, the AUD/JPY’s recent gains around 103.00 underscore the influence of central‑bank policy on currency movements. The combination of a decisive policy shift from the BoJ and solid technical support positions the pair for continued upward movement, provided that the macro environment remains supportive.