AUD/JPY holds steady near 109.00 after Australia jobs data
- AUD/JPY flat lines around 109.00 in Thursday’s early Asian session.
- Australia’s Unemployment Rate steadied at 4.1% in January, better than expected.
- Expectations that the BoJ will stick to its policy tightening path might lift the Japanese Yen.
The AUD/JPY cross trades on a flat note near 109.00 during the Asian trading hours on Thursday. The release of the Australian employment report for January fails to boost the Australian Dollar (AUD) against the Japanese Yen (JPY). Traders brace for Japan’s National Consumer Price Index (CPI), which is due later on Friday.
Data released by the Australian Bureau of Statistics (ABS) on Thursday showed that the Unemployment Rate in Australia stayed at 4.1% in January. The figure came in below the market consensus of 4.2%. Meanwhile, the Australian Employment Change arrived at 17.8K in January from 68.5K in December (revised from 65.2K), missing the expectations of 20K.
This report might lead some analysts to suggest that the Reserve Bank of Australia (RBA) may have more room for further interest rate hikes to curb persistent inflation, which could support the Aussie.
On the other hand, bets that the Bank of Japan (BoJ) will stick to its policy tightening path could underpin the JPY and create a headwind for the cross. Markets are pricing in nearly an 80% probability of a rate hike by the BoJ in April 2026, according to Reuters.
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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