AUD/JPY is facing downward pressure, dropping for the second straight day. The currency pair has pulled back from a recent high of 101.80, moving closer to the key level of 100.00 during the Asian session. The Reserve Bank of Australia’s November minutes indicated caution regarding potential rate cuts, which negatively affected the Australian Dollar. Meanwhile, the yen received some support due to concerns from Japan’s Finance Minister about market conditions and a general risk-off sentiment.

Japan’s Fiscal Policy And Economic Challenges

Japan’s Prime Minister intends to start discussions on tax reform to encourage investment. This raises questions about Japan’s fiscal health. Weak GDP figures for Q3 may pressure the Bank of Japan to adjust interest rates, affecting JPY activity. The Reserve Bank of Australia influences the AUD through interest rates, with inflation data impacting its strength. Economic indicators can shift AUD values, as investors often prefer stable, growing economies. Quantitative easing usually weakens the AUD, while quantitative tightening may strengthen it. Recent insights from Haresh Menghani highlight AUD/JPY movements amid the monetary and fiscal situations in Australia and Japan. These fluctuations reflect ongoing economic challenges and policy choices in both countries. As of November 18, 2025, the AUD/JPY pair shows weakness after failing to maintain its recent one-year high. It is now testing the significant 100.00 psychological level, creating uncertainty in the market. This situation represents a struggle between a cautious Reserve Bank of Australia (RBA) and uncertainty surrounding the Bank of Japan (BoJ).

Australian And Japanese Monetary Dynamics

The Australian dollar is under pressure due to recent RBA minutes that suggested rate cuts could be considered despite ongoing inflation issues. Australia’s inflation rate remains high at 3.4% with a strong labor market showing unemployment at 3.7%. This places the RBA in a tough spot, making call options on the Aussie dollar less appealing in the short term. Conversely, the Japanese yen is temporarily bolstered by fears of government intervention. Officials have warned about the rapid decline of the yen, recalling past currency interventions seen in 2022. Such warnings make traders hesitant to short the yen, potentially stabilizing AUD/JPY for now. However, the case for a stronger yen still appears weak, which may limit the pair’s decline. A preliminary Q3 GDP report on November 17 showed a -0.5% annualized contraction, complicating the Bank of Japan’s exit from its loose monetary policy. This economic backdrop should restrain sustained yen strength and support the AUD/JPY cross above important long-term levels. Given these mixed signals, traders should brace for increased volatility in the upcoming weeks. A significant drop below the 100.00 level could trigger further selling, making protective put options a smart strategy. Alternatively, traders might consider options strategies like straddles around the 100.00 strike price to profit from a major price movement in either direction as these pressures eventually resolve. Create your live VT Markets account and start trading now.

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