AUD/JPY Strengthens Amid Reassessed Rate Hike Expectations

The AUD/JPY cross has strengthened to around 113.55 during early European trading on Friday, defying expectations of a weaker Australian Dollar following recent labor market data.

Australia's unemployment rate ticked up to 4.5% in July from 4.4% the previous month, while employment unexpectedly fell by 15,800 jobs, missing market forecasts of a 15,000 growth.

This weaker-than-expected jobs report has led markets to reassess the likelihood of further aggressive interest rate hikes by the Reserve Bank of Australia (RBA), with some analysts believing that it strengthens the case for the RBA to hold off on raising rates.

Ashwin Binwani, founder of Alpha Binwani Capital, noted that institutional investors remain positioned in carry trades against a basket of G10 currencies led by the AUD, while traders are rebuilding bearish bets on the JPY as the impact of intervention fades.