AUD/JPY edges higher to near 95.50 as RBA holds cash rate steady at 3.85%

• AUD/JPY holds positive ground to around 95.50 in Tuesday’s Asian session.

• The RBA unexpectedly holds its OCR steady at 3.85% at the July meeting.

• Trump said Japan would face tariffs of 25% unless it reached an agreement with the US. 

The AUD/JPY cross gathers strength to near 95.50 during the early Asian trading hours on Tuesday. The Australian Dollar (AUD) attracts some buyers against the US Dollar (USD) after the Reserve Bank of Australia (RBA) interest rate decision.  

The RBA board members decided to leave the Official Cash Rate (OCR) unchanged at 3.85% at its July policy meeting on Tuesday.  The decision surprised the market expectations of a 25 basis points (bps) cut to 3.6%. 

The RBA monetary policy statement said that the board will be attentive to the data and the evolving assessment of risks to guide its decisions, adding that the outlook remains uncertain. The attention will shift to the RBA press conference later on Tuesday. Hawkish remarks from the RBA Governor could boost the Aussie, while a dovish message tends to weaken it.

On the JPY’s front, US President Donald Trump late Monday announced imposing 25% levies on goods from Japan, effective August 1. Trump warned that any retaliatory tariff would be met with even higher tariffs but left the door open to relief from the measures for countries that ease trade barriers.

Japanese Prime Minister Shigeru Ishiba said early Tuesday that Japan hasn’t been able to reach an agreement with the US because the country kept defending what needs to be defended. Furthermore, weak wage growth data released from Japan earlier could further complicate the Bank of Japan’s (BoJ) path to normalizing monetary policy and turn out to be a key factor weighing on the JPY.