AUD/JPY SHOOTS TO NEAR 93.00 AS RBA RAISES INTEREST RATE SURPRISINGLY BY 25 BPS TO 4.10%

AUD/JPY tested 93.00 after the RBA surprisingly raised interest rates y 25 bps to 4.10%.

RBA believes that inflation in Australia has passed its peak, but at 7% is still too high.

The BoJ is expected to make a stealth intervention in the currency market to provide some cushion to the Japanese Yen.

The AUD/JPY pair has jumped to near the crucial resistance of 93.00 after the announcement of a hawkish interest rate decision by the Reserve Bank of Australia (RBA). The RBA has raised its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10%.

Considering the fact that Australian inflation turned stubborn again as the monthly Consumer Price Index (CPI) indicator rose to 6.8% in April from March’s 6.3% figure, RBA Governor Philip Lowe was forced to raise interest rates again so that the impact of sticky inflation could get restricted.

The commentary from RBA’S Lowe has opened doors for further policy tightening as he stated that some further tightening of monetary policy may be required. The central bank believes that inflation in Australia has passed its peak, but at 7% is still too high and it will be some time yet before it is back in the target range.

Going forward, Australia’s Q1 Gross Domestic Product (GDP) will be keenly watched. As per the estimates, the Australian GDP is seen expanding at a slower pace of 0.3% than the 0.5% expansion recorded in the last quarter. On an annual basis, the economic data is expected to drop to 2.4% vs. the prior release of 2.7%.

On the Japanese Yen front, the Bank of Japan (BoJ) is expected to make a stealth intervention in the currency market to provide some cushion to the Japanese Yen, which is facing the heat of expansionary monetary policy.

According to a Reuters report, bets against the Japanese Yen have risen to $8.6 billion equivalent, which was a similar level when Japan’s authorities intervened last year.