AUD/JPY falls below 93.00, downside seems limited as Japan considers debt issuance changes
- AUD/JPY edges lower as the Japanese Yen recovers its losses due to hawkish tone surrounding the BoJ’s rate outlook.
- The JPY may lose ground as Japan may tweak in government debt issuance.
- National Australia Bank expects that the RBA may adopt a less dovish stance in future policy meetings.
AUD/JPY halts its three-day winning streak, trading around 92.90 during the European hours on Wednesday. The currency cross depreciates as the Japanese Yen (JPY) gains ground, possibly driven by the expectations that the Bank of Japan (BoJ) will continue raising interest rates amid the broadening inflation in Japan.
However, the AUD/JPY may regain its ground as the Japanese Yen may struggle again as Japan signaled potential cuts in government debt issuance. On Monday, Japan’s Ministry of Finance asked for feedback from market participants on bond issuance and the current market situation, according to Bloomberg.
On Tuesday, Reuters reported that Japan’s Ministry of Finance will consider reducing its super-long bond issuance to adjust the composition of its bond program for the current fiscal year. On Wednesday, Japan’s Finance Minister Shunichi Kato said that the government is concerned about the recent spike in yields and will closely monitor bond market situations.
The AUD/JPY cross also faced challenges as the Australian Dollar (AUD) struggled despite a higher-than-expected Monthly Consumer Price Index (CPI) release on Wednesday. The Australian Bureau of Statistics reported that monthly inflation, in the price of a fixed basket of goods and services acquired by household consumers, remained steady at a 2.4% increase year-over-year in April, higher than the expected 2.3% rise.
National Australia Bank (NAB) anticipates that the Reserve Bank of Australia (RBA) may adopt a less dovish stance and expects the central bank to return the cash rate to a neutral stance over the coming months. However, the NAB has lifted terminal rate expectation to 3.1% from the previous 2.6%.
