AUD/JPY weakens below 104.50 as BoJ's Adachi emphasizes reducing bond buying

• AUD/JPY lost ground as Adachi highlighted the need to reduce bond-buying in stages.
• The risk aversion sentiment contributed to the downside of the Australian Dollar.
• Australia’s Monthly Consumer Price Index rose 3.6% YoY in April, against the expected decline to 3.4% from 3.5% prior.

AUD/JPY halted its three-day winning streak, trading around 104.30 during the European session on Wednesday. The Japanese Yen (JPY) appreciated against the Australian Dollar (AUD) after Bank of Japan (BoJ) board member Seiji Adachi emphasized reducing bond buying in stages so that long-term yields could better serve as a market signal. However, Adachi did not provide a specific timeline for this adjustment, per Reuters

Regarding the interest rate outlook, Adachi commented that it would be appropriate to increase interest rates at a slow pace if underlying inflation steadily moves toward the 2% target. Earlier in the day, He also highlighted the potential consequences of frequent changes in monetary policy aimed at stabilizing foreign exchange movements. He warned that significant fluctuations in interest rates could disrupt household and corporate investment.

The Australian Dollar (AUD) moves back and forth during the Asian session after the release of the higher-than-expected consumer inflation data. Australia’s Monthly Consumer Price Index rose 3.6% year-over-year in April, surpassing the expected reading of 3.4% and the previous reading of 3.5%.

The stronger consumer inflation data could prompt the Reserve Bank of Australia (RBA) to consider another rate hike. The minutes from the RBA's May policy meeting suggested that the central bank had contemplated a potential interest rate increase.