AUD/JPY moves above 101.00 due to BoJ uncertainty regarding interest rate hikes

Source Fxstreet
  • AUD/JPY gains ground due to uncertainties regarding the future BoJ interest rates outlook.
  • BoJ's Summary of Opinions highlighted divisions among policymakers regarding the timing of future rate hikes.
  • The Australian Dollar faced challenges as China's latest stimulus measures fell short of investors’ expectations.

AUD/JPY retraces its recent losses from the previous session, trading around 101.20 during early European hours on Monday. The upside of the AUD/JPY cross is attributed to lower Japanese Yen (JPY) following the release of the Bank of Japan's (BoJ) Summary of Opinions. The BoJ’s October report highlighted divisions among policymakers regarding the timing of future interest rate hikes.

Some members of the Bank of Japan expressed concerns about global economic uncertainties and rising market volatility, particularly around the Yen's depreciation. Still, the central bank has suggested it might increase its benchmark policy rate to 1% by the latter half of the 2025 fiscal year. 

In Japan, Prime Minister Shigeru Ishiba’s Cabinet resigned en masse before the Diet (parliament) during an extraordinary Cabinet meeting on Monday morning. With the ruling coalition of the Liberal Democratic Party (LDP) and Komeito now holding less than a majority in the House of Representatives, Monday’s vote is expected to lead to a runoff between Ishiba and Yoshihiko Noda, the leader of the major opposition party, the Constitutional Democratic Party.

The Australian Dollar (AUD) edged higher despite a generally cautious outlook due to concerns over Donald Trump’s proposed tariff increases on Chinese goods, which could impact Australian markets as China is one of its largest trading partners. 

Further weighing on the Australian Dollar were China’s latest stimulus measures, which fell short of investor expectations and dampened demand prospects for Australia’s top trading partner. On Friday, China announced a 10 trillion Yuan debt package aimed at easing local government financing pressures and supporting sluggish economic growth; however, the package stopped short of including direct economic stimulus initiatives.

Interest rates FAQs

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Bitcoin volatility drops to third-lowest level since 2012 amid rise in BTC treasury companiesBitcoin (BTC) trades above $108,000 on Tuesday following a steady decline in its volatility in the first half of the year, marking the third-lowest H1 volatility since 2012.
Author  FXStreet
Yesterday 02: 11
Bitcoin (BTC) trades above $108,000 on Tuesday following a steady decline in its volatility in the first half of the year, marking the third-lowest H1 volatility since 2012.
placeholder
AUD/NZD inches higher to near 1.0900 as RBNZ maintains Official Cash Rate at 3.25%AUD/NZD holds ground after the Reserve Bank of New Zealand (RBNZ) decided to stand pat on the policy rate after six consecutive cuts, trading around 1.0890 during the Asian hours on Wednesday.
Author  FXStreet
Yesterday 03: 03
AUD/NZD holds ground after the Reserve Bank of New Zealand (RBNZ) decided to stand pat on the policy rate after six consecutive cuts, trading around 1.0890 during the Asian hours on Wednesday.
placeholder
Ethereum Price Turns Positive — More Upside Likely if Momentum HoldsETH is now consolidating gains and might aim for a fresh move above $2,620.
Author  NewsBTC
Yesterday 03: 26
ETH is now consolidating gains and might aim for a fresh move above $2,620.
placeholder
Jeff Bezos sold nearly 3 million Amazon shares for $665.8 million in early JulyJeff Bezos has sold nearly three million shares of Amazon in the first two days of July, offloading a total of $665.8 million.
Author  Cryptopolitan
Yesterday 03: 43
Jeff Bezos has sold nearly three million shares of Amazon in the first two days of July, offloading a total of $665.8 million.
placeholder
Gold price slides further below $3,300, over one-week low amid a firmer USDGold price (XAU/USD) trades with a negative bias below the $3,300 mark during the Asian session on Wednesday and drops to a one-and-a-half-week low in the last week.
Author  FXStreet
22 hours ago
Gold price (XAU/USD) trades with a negative bias below the $3,300 mark during the Asian session on Wednesday and drops to a one-and-a-half-week low in the last week.
Related Instrument
goTop
quote