The Australian dollar struggled to gain traction against the yen on Tuesday, with AUD/JPY lingering below the mid-90.00s range despite stronger-than-expected economic data out of China. The pair’s muted reaction highlights lingering caution in the markets, as risk sentiment remains fragile and the yen continues to benefit from safe-haven flows.
China reported Q1 GDP growth of 5.3% year-on-year, beating forecasts and signaling a more stable economic footing for Australia’s largest trading partner. Industrial production and retail sales also showed improvement, typically supportive for the Australian dollar given its commodity-export dependence. However, the broader market tone remained cautious, limiting any meaningful upside for AUD.
AUD/JPY hovered near 94.80, down modestly on the day, as investors weighed the implications of a resilient Chinese economy against persistent global headwinds, including heightened geopolitical tensions and uncertain central bank outlooks. The yen, meanwhile, continues to draw buyers amid lower U.S. Treasury yields and ongoing market volatility.
“Even with the China data coming in above expectations, there’s still a lot of underlying nervousness,” said a Sydney-based FX strategist. “The market is looking for more confirmation that China’s recovery is sustainable and not just front-loaded.”
Adding to the pressure on AUD is the prospect of a more cautious Reserve Bank of Australia, with recent commentary suggesting policymakers remain wary of inflation but are not yet prepared to tighten policy further. In contrast, the Bank of Japan’s slower pace of normalization has so far failed to weaken the yen meaningfully, especially as global risk appetite fades.
Traders will now focus on upcoming Australian labor data and further signals out of China to gauge near-term direction. Unless risk appetite improves substantially, AUD/JPY may continue to struggle to regain higher ground despite improving regional fundamentals.
