Anna 
During the European session on Tuesday, the AUD/JPY pair has retreated to around 99.10, reflecting heightened risk aversion among investors as they await Israel’s response to Iran’s recent air strike with caution. Additionally, the Australian Dollar (AUD) is encountering obstacles amidst concerns that the Reserve Bank of Australia (RBA) may need to reduce interest rates in the near future.
The negative sentiment surrounding the Australian Dollar is largely driven by the divergent monetary policy outlooks between the RBA and the Federal Reserve (Fed). Reports from the “Financial Review” suggest that the RBA may be compelled to ease monetary policy before the Fed, further weighing on the AUD. Moreover, uncertainty prevails regarding whether the Fed will take action this year amidst persistent high inflation in the United States (US), the world’s largest economy.
However, the Australian Dollar has managed to pare some of its losses following mixed data from China, its significant trading partner. China’s Gross Domestic Product (GDP) for the first quarter of 2024 exceeded expectations, with a 1.6% quarter-on-quarter increase and a 5.3% annual growth rate. Nonetheless, China’s Industrial Production (YoY) in March fell short of market expectations, registering a 4.5% increase.
On the other hand, the Japanese Yen may have encountered challenges due to the Bank of Japan’s (BoJ) dovish outlook. The BoJ’s decision to halt negative interest rates in March has contributed to limiting the downside of the AUD/JPY cross.
According to reports from Reuters, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi emphasized the importance of stable currency movements that reflect underlying fundamentals. He stated that authorities are closely monitoring foreign exchange (FX) movements and are prepared to take necessary measures to ensure stability. Similarly, Japanese Finance Minister Shunichi Suzuki reaffirmed his vigilance regarding FX movements and readiness to implement any necessary measures.
