Ella 
AUD/JPY is trending higher for the second consecutive day in Asia on Wednesday, trading around 96.70. AUD/JPY strengthened after Reserve Bank of Australia Governor Bullock’s hawkish speech on Tuesday boosted market confidence in the Australian dollar (AUD).
The Reserve Bank of Australia kept the official cash rate (OCR) at 4.35% on Tuesday, in line with market expectations. Reserve Bank of Australia Governor Bullock did not make any clear stance on future policy decisions. Reserve Bank of Australia Governor Bullock stressed the importance of balancing risks and highlighted the RBA’s efforts to collect data to confirm that inflation will return to target levels. Reserve Bank of Australia Governor Bullock said he expects inflation to reach 2.8% in 2025.
On the other hand, Japan’s foreign exchange reserves report released on Wednesday showed a slight decline, standing at $1,291.8 billion in January compared with $1,294.6 billion in December. In addition, labor cash income (annual rate) released on Tuesday also rose, recording 1.0%, the previous value was 0.7%, but lower than the expected value of 1.3%.
The yen has been supported by expectations that another significant wage increase this year will help sustain and stabilize inflation. This optimism fuels market expectations that the Bank of Japan (BoJ) may gradually withdraw from its extremely dovish policy stance. In addition, the Bank of Japan also hinted at the possibility of ending the negative interest rate cycle, indicating that the direction of the Bank of Japan’s monetary policy may be adjusted.
