AUD/JPY Holds Steady as BoJ and RBA Prepare for Interest Rate Hikes

The AUD/JPY cross is trading flat near 110.10 in Monday's early European session, as investors await the Bank of Japan's policy interest rate hike on Friday.

Market expectations are that the BoJ will raise its policy rate to 1.25% at its September meeting, with underlying inflation nearing the central bank's 2% target.

The last time the BoJ's policy interest rate stood at 1.25% was in April 1995.

Analysts at MUFG noted that a 25 bps hike is already almost fully priced, but for the yen to strengthen further, the BoJ will have to signal that it plans to stick to a faster pace of hikes.

The Reserve Bank of Australia is also expected to raise its Official Cash Rate to 4.60% at its next meeting, with markets pricing in nearly a 76% chance of a hike.