AUD/JPY Slides as RBA Rate Hike Expectations Fading

The Australian Dollar (AUD) remains depressed against the Japanese Yen (JPY), but its downside seems limited due to Japan's fiscal concerns, according to a recent analysis by TMGM trading.

AUD/JPY prices slid back to the 111.00 mark during the European session after stalling its goodish recovery from a multi-month trough, driven by profit-taking and expectations that the Reserve Bank of Australia (RBA) will leave rates unchanged next week.

The RBA's decision is seen as key to the AUD/JPY cross, with analysts at Standard Chartered noting that their base case remains that the RBA is done raising interest rates in the foreseeable future, citing a sufficiently restrictive policy stance.

Japan's fiscal concerns weigh on the JPY, despite borrowing costs remaining exceptionally low relative to other major economies. The BoJ-RBA rate gap also limits losses for the AUD/JPY cross, as the brutal market reaction to a joint US-Japan intervention last week fades amid concerns about Japan's worsening fiscal condition.