Ella 
In the Asian market on Thursday, the AUD/JPY cross attracted some buying for the third consecutive day and rebounded to a new weekly high (near 96.85). However, AUD/JPY remains within a multi-day trading range and investors will need to exercise caution before taking positions on the recent rebound from the mid-95.00 level, the monthly low hit last week.
The Australian dollar (AUD) continued to be supported by the Reserve Bank of Australia’s (RBA) hawkish outlook earlier this week, warning that further interest rate hikes would not be ruled out while inflation remains severe.
Data from China’s National Bureau of Statistics showed that China’s consumer price index (CPI) rose 0.3% month-on-month in January and recorded an annual rate of -0.8%, below expectations of 0.4% and -0.5% respectively. Meanwhile, the producer price index (PPI) was slightly better than expected, recording a monthly rate of -2.5% in January, but did little to ease deflation concerns.
At the same time, general risk appetite sentiment has suppressed market demand for the safe-haven currency Japanese yen (JPY), while hawkish comments from Bank of Japan (BOJ) Deputy Governor Uchida Shinichi have further weakened demand for the Japanese yen. Uchida said during a meeting with local leaders in Nara that the Bank of Japan wanted to maintain a stable and easy monetary environment as uncertainty about the economic outlook remained high.
At the same time, Uchida expects Japan’s economy to continue to recover and the positive wage-inflation cycle to be strengthened, and he also agrees with the Bank of Japan’s view that the possibility of continuing to achieve the price target is gradually increasing. Additionally, investors appear to believe wage growth could be greater this year than in 2023, paving the way for the Bank of Japan to exit its decade-long ultra-loose monetary policy regime.
This will therefore limit the apparent depreciation of the yen and limit the gains in the AUD/JPY cross. However, the above fundamental backdrop appears to favor bullish traders, supporting the prospects for further gains in AUD/JPY.
