AUD/JPY - Australian dollar to Japanese yen

After strengthening against the yen following the election of Trump and continuing its ascent in early 2017, AUD/JPY ran out of steam. Since then the pair has traded with no obvious long-term trend. The exchange rate has fallen on political risks (particularly North Korea), while gaining when tensions subside. For this reason, the AUD/JPY exchange rate is frequently seen a barometer of global risk appetite. 

Outlook
Bearish

Australian dollar daily update

The Australian dollar is currently mixed. The Aussie is flat against the US dollar, while strengthening against the Japanese yen, euro and the British pound. Yesterday, the currency strengthened against the US dollar at the outset of the day, but ended the day lower. Today's AUD/USD trading range is 0.7350 - 0.7510. The pair is currently trading just above the low end of our indicated trading range. 

Chinese equity markets have resumed selling off after yesterday's rebound. Both the Shanghai Composite and Hong Kong's Hang Seng Index are currently weaker. The Chinese offshore yuan (CNH) is also down sharply, with USD/CNH currently trading above 6.50. Given Australia's significant trading relationship with China, the currency tends to closely track developments in Chinese financial markets. Thanks to an ongoing deceleration in growth across emerging markets, the Australian dollar remains under pressure. 

Looking at developments from Australia, RBA Governor Philip Lowe said that global inflation may be set to remain low for extended periods of time. Lowe also highlighted the unknown risks associated with prolonged quantitative easing. Recent communications from the RBA suggest that the Bank remains firmly in neutral. 

In politics, Prime Minister Turnbull has claimed a major victory after passing income tax cuts through Australia's Senate. The news had a limited impact on the currency as the Australian dollar remains weighed down by concerns regarding the future outlook. Our outlook on the Australian dollar remains bearish. 

AUD/USD is down slightly and trading just above 0.7350. EUR/AUD is down and trading above 1.5680. GBP/AUD is down slightly and trading above 1.7830. AUD/JPY is up slightly, and trading above 81.20.

Date Event Actual Previous
June 19 House Price Index YoY Q1 2% 5.0%
June 19 RBA Meeting Minutes
June 20 RBA Gov Lowe Speech
June 21 Westpac Leading Index MoM MAY 0.2%
June 21 RBA Bulletin
Updated 

Japanese yen daily update

The Japanese yen is weakening against all currencies except the British pound today. The yen weakened yesterday after US Federal Reserve Chair Powell suggested that the case to raise US interest rates was "strong". His comments sent US Treasury bond yields higher, and also pushed up yields for many other developed country government bonds. Today's USD/JPY trading range remains 109.50 - 111.20. 

The main short-term driver behind the yen remains rising US Treasury bond yields and overall strength in the US dollar. Thanks to accelerating US growth and inflation, the US currently has the best economic outlook of any major country in the world. A combination of relatively strong US growth and supportive risk sentiment is helping the yen weaken further. 

Turning to other developments, Bank of Japan board member Funo said that Bank needs to focus on weak inflation. Funo said that the BoJ should continue its powerful monetary easing policies, while risks for weak inflation over the long-term were large. Governor Kuroda recently acknowledged weak inflation, and promised to deepen the debate regarding its causes at next month's meeting. Recent communications from the BoJ suggest that the Bank remains committed to its existing policies. Thanks to a slowdown across Europe and Asia, Japanese monetary policy is not expected to tighten at any point in the near future. Our outlook on the Japanese yen remains bearish. 

USD/JPY is currently trading above 110.50. EUR/JPY is up slightly and trading above 127.70. GBP/JPY is flat and currently trading above 145.30.

Date Event Actual Previous
June 18 Adjusted Merchandise Trade Balance MAY -¥300.0b ¥550.0b
June 20 BoJ Monetary Policy Meeting Minutes
June 20 BoJ Kuroda Speech
June 21 Foreign Bond Investment 16/JUN ¥1490.4b -¥475.6b
June 21 Stock Investment by Foreigners 16/JUN -¥40.8b -¥108.3b
June 21 BoJ Funo Speech
June 22 Inflation Rate YoY MAY 0.6%
June 22 Core Inflation Rate YoY MAY 0.7%
June 22 Nikkei Manufacturing PMI Flash JUN 52.8
Updated 

Australian dollar to Japanese yen Outlook

Outlook
Bearish

Updated 

Australian dollar analysis

Australian dollar looks like an enticing short opportunity

In our previous take on the Australian dollar in late February, we wrote that falling commodity prices, an ongoing slowdown in China, and weak domestic conditions (looking at both economic data and monetary policy expectations) were significant headwinds for the currency. Beyond economic indicators, quantitative signals also suggested that the bullish trend was running out of steam. We downgraded…

Published 

Australian dollar forecast: rally set to end

We take a closer look at the Australian dollar forecast, and how domestic and international economic changes are set to impact the currency. From China's slow down to key domestic indicators that reveal slowing growth, we break down why we're changing our outlook on this commodity currency.

Published 

Australian dollar: a bull market with caveats

For a currency that strengthens when global growth accelerates, recent moves in the Australian dollar have been fairly disappointing. While the currency rocketed higher between mid-December and late January, the Australian dollar has sold off sharply in recent weeks. The currency first began weakening against the Japanese yen, which led us to downgrade our short-term AUD/JPY outlook to neutral on…

Published 

Japanese yen analysis

Japanese yen: safe haven or inflation proxy?

In our last commentary on the Japanese yen, we wrote that the currency was looking excessively weak against the euro. In particular, we stated that bullish catalysts driving EUR/JPY were at risk as speculator positioning in both long euro and short yen trades were looking extreme. In addition, we flagged changes to the Bank of Japan’s “yield curve control” program as a potential risk for yen stre…

Published 
Tags: Japanese yen

EUR/JPY: An “easy” long idea gets trickier

In early 2017, doubts regarding the integrity of the Eurozone led many to take refuge in the Japanese yen. Unlike the euro, the Japanese yen exhibits classic safe haven characteristics and tends to strengthen during downturns. Following the Brexit referendum vote and US presidential elections, few were willing to bet on opinion polls that predicted Macron’s victory. Similar to political events in…

Published 

Japanese yen: Bank of Japan versus interest rates

Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

Published 
Tags: Japanese yen

Economic calendar

Economic Calendar by TradingView