Market Analysis

Market Analysis
Economic Calendar
Newsflash

AUD/JPY Falls as Market Bets on December BoJ Rate Hike

Mellissa · 22 Nov 20241.8K Views

AUD/JPY continues to slide, approaching 100.30 during Asian trading hours on Friday, driven by a stronger Japanese Yen (JPY). This strength follows a Reuters survey suggesting 56% of economists expect the Bank of Japan (BoJ) to raise interest rates at its December meeting, citing the Yen's depreciation and improving economic conditions.

The survey also reveals that 90% of economists anticipate the BoJ will hike rates to 0.50% by March 2025, with the median terminal rate forecast at 1.00%, ranging between 0.50% and 2.50%. Additionally, 96% believe a potential return of Donald Trump to the U.S. presidency could push the BoJ to further tighten policy, as his policies are expected to heighten global inflation.

BoJ Governor Kazuo Ueda has emphasized the importance of addressing the Yen's impact on economic stability, signaling potential rate increases, while Prime Minister Shigeru Ishiba’s administration is weighing a $90 billion stimulus package to ease rising costs for households.

Recent data shows Japan’s National Consumer Price Index (CPI) slowed to 2.3% year-over-year in October, the lowest in nine months. Similarly, core CPI, excluding fresh food, dipped to 2.3%, a six-month low, slightly surpassing the forecast of 2.2%. The Jibun Bank Japan Services PMI rose to 50.2 in November from 49.7 in October, rebounding after a four-month low.

However, the Manufacturing PMI unexpectedly dropped to 49.0 in November from 49.2, marking its weakest reading since March and missing market expectations of 49.5.

Meanwhile, the Australian Dollar (AUD) remains under pressure following mixed Judo Bank PMI data. The Manufacturing PMI improved to 49.4 in November from 47.3 in October, signaling the slowest contraction in six months. However, the Services PMI declined to 49.6 from 51.0, marking its first contraction in 10 months.

Despite this, the AUD finds some support from the Reserve Bank of Australia's (RBA) hawkish stance on future rate hikes, helping to cushion losses against the JPY.