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31/10/24
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Market Reaction: AUD/JPY Declines as BoJ Holds Rates Steady Amidst Economic Uncertainty
The AUD/JPY currency pair experienced a decline after the Bank of Japan (BoJ) decided to maintain its short-term interest rate at 0.25%. The BoJ’s Q3 Outlook Report highlighted a commitment to raising policy rates, contingent on the economy meeting its forecasts. Meanwhile, Australia’s Retail Sales showed a modest increase of 0.1% month-over-month in September, which was below the anticipated 0.3% and significantly lower than the previous month’s 0.7% growth.
During Thursday’s Asian trading session, the AUD/JPY pair traded around 100.50, retracing gains made in earlier sessions. The strengthening of the Japanese Yen followed the BoJ’s monetary policy announcement, which aligned with market expectations for stability. The BoJ’s choice to keep interest rates unchanged was made after a two-day review and reflects a broader strategy focused on achieving a 2% inflation target sustainably.
Despite the central bank’s outlook for potential rate increases, challenges may arise from Japan’s political landscape, which might prompt expansionary fiscal policies. This political uncertainty, combined with cautious market sentiment, is lending support to the Japanese Yen as a safe-haven asset. Investors are keenly awaiting the press conference following the BoJ’s meeting, where insights from BoJ Governor Kazuo Ueda are expected to shed light on future monetary policy direction.
In Australia, the retail sector’s performance has been underwhelming. The slight month-over-month increase in retail sales for September indicates a slowing momentum, with quarterly growth of 0.5% in Q3 bouncing back from a 0.3% decline in the previous quarter, yet still signaling economic fragility.
In related news, China’s Non-Manufacturing PMI rose to 50.2 in October, up marginally from 50.0 in September but below expectations of 50.4. The Manufacturing PMI also showed improvement, climbing to 50.1 from 49.8. Given the intertwined nature of Australian and Chinese economies, fluctuations within China could notably influence Australia’s market dynamics.
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