The Australian Dollar Strengthens Against The Yen

The Australian Dollar is getting stronger compared to the Yen. This change comes as expectations shift around the Reserve Bank of Australia’s monetary policy. Recent Australian CPI data showed a 1.3% increase for the quarter, which is higher than the expected 1.1%. On a global scale, all eyes are on the upcoming US-China meeting, where a positive trade deal is expected. These ongoing discussions are making risky assets more appealing, which is affecting the current market situation. A currency heat map indicates that the Australian Dollar is the strongest currency against the Japanese Yen. This map highlights percentage changes in major currencies, making it easy to compare them using a base and quote currency system. The Bank of Japan’s decision to keep its interest rate at 0.5% has weakened the Yen, pushing the AUD/JPY close to 100.70. This move was largely expected, especially since the current administration prefers relaxed monetary policies. However, the 7-2 vote split shows some internal disagreements, although not enough to impact immediate plans. This policy decision is backed by recent economic data from Japan. The Bank of Japan has little reason to tighten its policies right now. The core inflation figure for September, released by Japan’s Ministry of Internal Affairs and Communications, matched the bank’s forecast at 2.7%. Additionally, Q3 GDP growth was only 0.4%, indicating that the BoJ will likely lag behind other major banks in raising rates.

Growing Divergence In Central Bank Policies

At the same time, the outlook for the Australian Dollar is becoming more positive as the Reserve Bank of Australia seems to be moving away from further rate cuts. This change in outlook is supported by the latest Q3 Consumer Price Index report from the Australian Bureau of Statistics, which showed a higher-than-expected quarterly increase of 1.2%. With the unemployment rate stable at around 4.0%, the RBA has a good reason to maintain its policy. This growing difference between a steady BoJ and a more aggressive RBA makes the AUD/JPY carry trade appealing again. This strategy worked well between 2022 and 2024 when the interest rate gap widened significantly. Currently, the policy rate spread between the two banks is 3.85%, providing an attractive yield for holding long AUD positions against the JPY. Traders in derivatives should see this as a positive sign for the pair in the coming weeks. Buying AUD/JPY call options with December or January 2026 expirations and targeting a strike price around 102.00 could be an effective way to prepare for further gains. Alternatively, selling out-of-the-money put options with a strike price below 99.00 could be a solid strategy to earn premium, assuming the policy divergence supports the pair’s value. We also remember that global risk sentiment, once influenced by events like the US-China trade talks in the late 2010s, continues to be important. Today, the focus is more on stable global growth and efforts to manage inflation. This environment generally favors riskier currencies like the Australian Dollar over safe-haven currencies like the Yen. Create your live VT Markets account and start trading now.

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