AUD/JPY Soars Amid BoJ Rate Hike Expectations
The AUD/JPY currency pair is trading near 113.40 in early European hours on Tuesday, supported by broad weakness in the Japanese Yen against the Australian Dollar.
Concerns over Japan's fiscal trajectory and ongoing inflation pressures are weighing on the Yen, with market participants looking ahead to Australian labor market figures due on Thursday.
A report from Reuters indicated that the Bank of Japan is considering a rate hike as early as September, with pricing in overnight index swaps now assigning roughly an 80% probability to such a move by that month.
DBS strategist Philip Wee highlights a sharp repricing in relative policy expectations, noting that 'market odds of a September Bank of Japan rate hike have surged to 81% from 21%, while expectations for a Fed hike have plummeted to 32% from 72%.'