AUD Strengthens on Diverging Central Banks

The Australian Dollar (AUD) strengthened against the Japanese Yen (JPY) on Monday, reaching 112.10, a gain of 0.32% on the day.

This move is attributed to expectations that the Reserve Bank of Australia (RBA) will deliver another interest rate increase next week, following its previous hike of 75 basis points this year to 4.35%.

RBA Governor Michele Bullock recently emphasized that inflation risks are still skewed to the upside and that the key issue is whether the policy moves delivered so far will be enough to bring inflation back to target within an acceptable period.

The contrast between solid expectations of further tightening in Australia and a more measured stance in Japan, as seen with the Bank of Japan's (BoJ) cautious signals, has sharpened the perception of policy divergence between the two central banks.