AUD/JPY hovers around 96.00 after pulling back from five-month highs

• AUD/JPY has reached its new five-month high at $96.21 on Wednesday.

• The Japanese Yen is under pressure as US-Japan trade negotiations show signs of strain.

• The AUD may receive support as the RBA's Bullock warned that inflation risks persist.

AUD/JPY continues its winning streak for the third successive session, trading around 95.80 during the European hours on Wednesday. The currency cross has marked its fresh five-month high at $96.21 as the Japanese Yen (JPY) struggles as trade negotiations between the United States (US) and Japan showed signs of strain, particularly over Japan’s rice market protections. This follows US President Donald Trump’s announcement of a 25% tariff on Japanese goods, effective August 1.

Japanese Prime Minister Shigeru Ishiba called the tariff decision “truly regrettable,” but reaffirmed Japan’s commitment to continue negotiations with Washington in pursuit of a mutually beneficial agreement.

However, the decline in the AUD/JPY cross could be restrained as the Australian Dollar (AUD) struggles amid rising odds of a Reserve Bank of Australia’s rate cut in August. A Reuters survey poll indicated that all 30 economists forecast the RBA to cut the cash rate by 25 basis points to 3.60% in August. Additionally, Australia’s four major banks, ANZ, CBA, NAB, and Westpac, also backed the rate cut call.

The AUD may regain its ground due to cautious remarks from the Reserve Bank of Australia (RBA) Governor, Michele Bullock said in a conference after the policy decision. Bullock stated that inflation risks persist due to elevated unit labor costs and weak productivity, which could push inflation above forecasts.

RBA Deputy Governor Andrew Hauser said on Wednesday that the global economy is facing an enormous amount of uncertainty. Hauser expressed surprise at how markets are shrugging and moving on. He also added that tariff effects on the global economy are profound and are likely to weigh on growth.