AUD/JPY continues to rise for the second session in a row, reaching a level of around 109.40 during European hours on Tuesday. The exchange rate is gaining strength as the Australian dollar (AUD) gained more than 1% against the Japanese yen (JPY) after the Reserve Bank of Australia (RBA) decided to raise the official cash rate (OCR) by 25 basis points (bps) to 3.85% from 3.6%, as expected.
AUD/JPY remains stronger following cautious remarks from RBA Governor Michele Bullock at a post-meeting press conference. Bullock said inflation pressures remain too forceful, warning that it will take longer to return to the target and is no longer acceptable. She stressed that the board would remain data-dependent and avoid future guidance.
AUD/JPY could deepen its gains as the Japanese yen finds support amid political uncertainty ahead of February 8 early elections, when Prime Minister Sanae Takaichi’s ruling party is expected to gain seats and continue its expansionary fiscal policy.
Over the weekend, Takaichi described the faint yen as an opportunity for export-driven industries, signaling tolerance for a softer currency. She later clarified that the comments were intended to highlight the economy’s resilience to exchange rate fluctuations, while Finance Minister Satsuki Katayama said the comments reflected standard economic principles on the impact of a weaker currency.
