AUD Tumbles Below 110 vs JPY Amid RBA Cautious Stance and Hawkish BoJ Bets
The Australian Dollar (AUD) continued its downward trend against the Japanese Yen (JPY), falling to an over two-week low during Tuesday's European session. The AUD/JPY cross dropped below the psychological mark of 110.00, down around 0.45% for the day, and remained within striking distance of its monthly trough.
The AUD's decline was largely due to Reserve Bank of Australia (RBA) Governor Michele Bullock's comments during the post-meeting press conference. Although the RBA had raised interest rates by 25 basis points as expected, Bullock failed to reassure markets that inflation developments would require additional tightening, leading traders to trim their bets for more rate hikes.
Meanwhile, Japan's top currency diplomat Atsushi Mimura and Finance Minister Satsuki Katayama warned markets about the US-Japan messaging on FX depreciation. The hawkish Bank of Japan (BoJ) bets also favored JPY bulls, backing the case for a further AUD/JPY decline.
The Minutes from the BoJ's July monetary policy meeting revealed that policymakers debated the need for faster interest rate hikes amid growing concern over mounting inflation risks. This led to expectations that the BoJ will hike again as soon as October or December, further undermining the AUD and supporting the case for a lower AUD/JPY cross.