AUD Slides vs JPY as BoJ Hike Expectations Grow
The Australian Dollar (AUD) has been under pressure against the Japanese Yen (JPY), despite China's inflation data meeting or exceeding expectations. The AUD/JPY exchange rate declined by 0.27% on Wednesday and was trading at around 110.80 at the time of writing.
China's National Bureau of Statistics reported that the Consumer Price Index (CPI) rose 0.8% YoY in August, in line with market expectations, and the Producer Price Index (PPI) increased 3.8% YoY, exceeding market expectations of 3.7%. However, these figures failed to trigger a meaningful recovery in the Australian Dollar.
The weakness in AUD/JPY primarily reflects the strength of the Japanese Yen. US Treasury Secretary Scott Bessent warned investors against betting against the Japanese currency, saying he has a 'pretty good insight' into the Bank of Japan's (BoJ) upcoming decisions and currency interventions.
Markets increasingly expect the BoJ to raise interest rates at its upcoming meeting, with some analysts speculating that it might even consider a 50bps hike. Rabobank notes that such a move would be the first since 1989, drawing parallels with an earlier era when the US used national security arguments against its allies to achieve policy objectives.