AUD/JPY tumbles to near 103.50 on mixed Australian employment data
- AUD/JPY falls to near 103.50 in Thursday’s early European session.
- Australia's Unemployment Rate was 4.3% in November, remaining steady from the previous month.
- Japan’s fiscal and growth concerns might cap the downside for the cross.
AUD/JPY slumps to around 103.50 during the early European session on Thursday. The Australian Dollar (AUD) softens against the Japanese Yen (JPY) following the release of mixed Australian employment data. Nonetheless, the Reserve Bank of Australia's (RBA) hawkish stance might help limit the AUD’s losses.
Data released by the Australian Bureau of Statistics (ABS) on Thursday revealed that the Unemployment Rate in Australia steadied at 4.3% in November. The figure came in below the market consensus of 4.4%. Additionally, the Australian Employment Change came in at -21.3K in November versus 41.1K in October (revised from 42.2K), compared with the consensus forecast of 20K. The Aussie edges lower in an immediate reaction to the mixed Australian jobs report.
On the other hand, the hawkish stance from the Australian central bank could provide some support to the Aussie against the JPY. RBA Governor Michele Bullock said that the interest rate reductions are not on the horizon for the foreseeable future and that the board discussed the possibility of rate hikes next year if inflationary pressures persist. Financial markets have priced in a potential rate hike as early as February or June 2026.
Meanwhile, traders remain worried about Japan's expansionary fiscal measures and growth amid Takaichi's administration's reflationary push and massive spending plan to boost sluggish economic growth. This, in turn, could weigh on the Japanese Yen and act as a tailwind for the cross. Prime Minister Sanae Takaichi has a pro-growth agenda, which is seen by markets as a signal for potential fiscal stimulus and looser financial conditions.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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