Australian Dollar holds losses against Japanese Yen following BoJ rate decision

• AUD/JPY holds losses as the Japanese Yen remains stronger following the BoJ policy decision.
• The BoJ decided to keep policy rate unchanged at 1.25%, as expected.
• AS of October 29, ASX futures indicated an 80% chance of an RBA rate hike to 4.85%.

AUD/JPY loses ground for the second consecutive day, trading around 110.80 during Asian hours on Friday. The currency cross holds losses as the Japanese Yen (JPY) remains stronger after the Bank of Japan (BoJ) board members decided to leave the short-term interest rate unchanged at 1.25% following the conclusion of its two-day monetary policy review meeting.

The downside of the AUD/JPY cross could be restrained as the Australian Dollar (AUD) receives support from expectations of further policy tightening by the Reserve Bank of Australia (RBA). Hotter-than-expected inflation data and hawkish comments from RBA officials have led markets to increasingly price in a rate hike at the central bank's upcoming November 3 meeting.

As of October 29, the ASX 30-day interbank cash rate futures November 2026 contract was trading at 95.22, signaling an 80% probability of an interest rate increase to 4.85% at the next RBA Board meeting.

RBA seen delivering one last hike as TD Securities flags firmer inflation

According to TD Securities, the firmer third-quarter CPI print has reinforced expectations that the RBA will move again next week. The bank now anticipates that the central bank will "lift the cash rate 25bps at next week's meeting to 4.85%," arguing that the stronger inflation outcome "validates the Bank's decision to hike last month" and that "likely forecast upgrades to the Bank's inflation track in the November Statement on Monetary Policy likely justify a follow-up 25bps hike next week." TD Securities adds that this "hike should mark the last in the cycle," suggesting the tightening phase is nearing its end.