AUD/JPY trims gains to near 96.50 as RBA cuts rate to 3.60% as expected

• AUD/JPY holds positive ground around 96.60 in Tuesday’s Asian session. 

• The RBA cut its OCR by 25 bps to 3.6% at the August meeting.

• The risk-on mood continues to weigh on the JPY, a safe-haven currency. 

The AUD/JPY cross pares gains to 96.60 during the Asian trading hours on Tuesday. The Australian Dollar (AUD) remains firm against the Japanese Yen (JPY) after the Reserve Bank of Australia (RBA) interest rate decision. Traders will closely monitor the RBA Governor, Michele Bullock’s press conference at 5:30 GMT later on Tuesday. 

The RBA board members decided to cut the Official Cash Rate (OCR) by 25 basis points (bps) to 3.60% from 3.85% at its August policy meeting on Tuesday.  The decision came in line with the market expectations. 

The RBA monetary policy statement said that labor market conditions have eased further in recent months, but various indicators suggest that labor market conditions remain a little tight. The statements noted that further easing of monetary policy was appropriate given the decline in underlying inflation back towards the target range band.

On the JPY’s front, the expectation that further policy normalization by the Bank of Japan (BoJ) could be delayed due to domestic political uncertainty and impact from US tariffs could weigh on the JPY and create a tailwind for the cross. Additionally, improved risk sentiment after US President Donald Trump extended the China tariff deadline by another 90 days undermines safe-haven currencies like the JPY against the AUD.

The attention will shift to the preliminary reading of Japan’s Gross Domestic Product (GDP) for the second quarter (Q2), which will be released later on Friday. Japan’s GDP is expected to expand 0.1% QoQ in Q2. In case of a stronger-than-expected outcome, this might help limit the Japanese Yen’s losses in the near term.