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The AUD/JPY cross fell for three consecutive days in the Asian session on Thursday, trading around 97.90. The recent encouraging Australian purchasing managers’ index (PMI) failed to boost the Australian dollar. Investors will closely watch the speech of Bank of Japan Governor Kazuo Ueda on Friday for new momentum.
Data released by Judo Bank and S&P Global on Thursday showed that Australia’s Judo Bank manufacturing purchasing managers’ index in August climbed to 48.7 from 47.5 in July. The services purchasing managers’ index rose to 52.2 in August from 50.4. Finally, the composite purchasing managers’ index rose to 51.4 from 49.9 in August.
Downside for the Australian dollar (AUD) may be limited as the Reserve Bank of Australia maintains a hawkish stance. The RBA noted that cash rates are likely to remain unchanged for a longer period of time and a rate cut is unlikely anytime soon.
On the other hand, expectations that the Bank of Japan (BoJ) will raise interest rates again before the end of the year boosted the yen against the Australian dollar. According to a Reuters poll on Wednesday, most economists believe the BoJ will raise rates again, with the median forecast for the year-end rate being 0.50%, an increase of 25 basis points (bps).
Philip Wee, senior FX strategist at DBS Bank, noted: “On August 23, the Japanese parliament will hold a special meeting to review the Bank of Japan’s monetary policy decision on July 31. If the median forecast set on July 31 is met or exceeded, Bank of Japan Governor Kazuo Ueda should stick to his plan to raise rates again.”
