AUD Slumps to April Low as Japan Intervention Sways Markets
The Australian Dollar (AUD) has been under pressure lately, falling to its lowest level since early April against the Japanese Yen (JPY). The AUD/JPY cross has dropped to around the 110.00 psychological mark, down over 0.50% for the day, after a modest uptick to the 111.20 region on Monday.
The sharp decline can be attributed to Japan's Finance Minister Satsuki Katayama confirming that Japanese authorities conducted a rare, bilateral foreign exchange market intervention with the US on Friday. The move was aimed at halting the JPY's decline and prompted aggressive follow-through JPY short-covering, exerting pressure on the AUD/JPY cross.
The Bank of Japan (BoJ) maintained a hawkish bias at its July meeting, showing readiness to continue pushing up borrowing costs and lending additional support to the JPY. The Reserve Bank of Australia (RBA), on the other hand, struggles to lure buyers amid diminishing odds for an immediate rate hike.
TD Securities notes that Governor Ueda's latest remarks marked a clear shift in tone, with the bank observing that he 'sounded the most hawkish that he's been in a long while.' Strategists at Deutsche Bank highlight that the latest inflation data have tempered expectations for further RBA tightening, reducing the urgency for additional interest rate hikes.