AUD/JPY traded near 109.00 as policy paths in Australia and Japan moved further apart. Australia’s January unemployment rate held at 4.1% (vs 4.2% expected). Job gains were 17.8K, below the 20K forecast.
Earlier this month, the RBA raised the cash rate by 25 basis points to 3.85%, its first increase in more than two years. The minutes kept a data-dependent tone and suggested inflation could rise again in the second half of 2025.
Policy Divergence Driving Audjpy
The BoJ kept its policy rate at 0.75% in January. Markets now price roughly an 80% chance of a BoJ hike by April. US Q4 GDP and core PCE are due on Friday.
On the chart, the pair stayed above the 50-day EMA at 106.60 and the 200-day EMA at 100.45 after rallying from about 104.72 in early January. It peaked at 110.79 in early February and has traded between about 109.00 and 110.00 for the past two weeks. Support sits near 108.00. If 110.79 breaks, the next upside target is around 112.00.
Key AUD drivers include interest rates, iron ore, China, inflation, growth, the trade balance, and overall risk appetite. Based on 2021 data, iron ore exports were about $118 billion per year.
The main driver of the Australian dollar versus the yen is the widening gap between the two central banks. The RBA still looks hawkish as it responds to the inflation surge seen in the second half of 2025. That gap makes the higher-yielding Australian dollar more attractive than the Japanese yen.
Key Risks And Trade Conditions
The hawkish RBA view is backed by a strong local economy, especially a tight labor market. With unemployment steady at 4.1%, markets may expect the RBA to raise rates again. High iron ore prices, Australia’s top export, also support the currency.
By contrast, the BoJ is moving more slowly toward normal policy settings. Even if the BoJ hikes by April, the pace looks gradual, so the rate gap with Australia may stay wide for a while. The key issue to watch is sustained wage growth in Japan, which could push the BoJ to act more firmly.
China’s outlook remains crucial for the AUD. Recent data has improved. China’s latest January manufacturing PMI showed modest expansion. If China stabilizes, it can support demand for Australian exports and improve the outlook for the AUD.
From a trading angle, with AUD/JPY consolidating near 109.00, options may fit this setup. Selling put spreads or cash-secured puts with strikes below support at 108.00 can generate premium while positioning for the idea that the fundamentals will limit a deeper drop. This can work if the pair trades sideways or grinds higher in the weeks ahead.
External shocks are still a risk. Major US inflation data, including the upcoming core PCE report, could trigger a risk-off turn. That would likely boost demand for the safe-haven yen and pressure AUD/JPY, even if the pair’s fundamentals remain supportive.
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