The AUD/JPY pair dipped below 97.00, pressured by softer Australian inflation data that dampened expectations for further monetary tightening. With inflation showing signs of easing, investors are reassessing the Reserve Bank of Australia’s (RBA) policy trajectory, raising concerns over the Australian dollar’s strength.
Weaker price pressures reduce the likelihood of additional rate hikes, leaving the Aussie vulnerable against the Japanese yen, which continues to benefit from risk aversion and steady demand for safe-haven assets. The Bank of Japan’s cautious stance on policy normalization has kept the yen relatively stable, further adding to downward pressure on AUD/JPY.
Market sentiment remains fragile as traders digest the implications of lower inflation on Australia’s economic outlook. A potential shift in RBA guidance could accelerate further losses in AUD/JPY, with investors closely watching upcoming data releases for confirmation of a softer economic environment.
Despite recent losses, the pair may find support at lower levels if risk appetite improves. However, without signs of renewed inflationary pressure, the Australian dollar’s recovery could remain limited, leaving AUD/JPY exposed to further downside risks.
