The Australian Dollar (AUD) extended its decline against the Japanese Yen (JPY), with the AUD/JPY cross falling for the second consecutive day on Thursday, retreating from a nearly two-week high of 114.35 and trading just above the mid-113.00s during the early European session [1]. This downward movement follows reduced market expectations for further interest rate hikes by the Reserve Bank of Australia (RBA), after disappointing Australian employment data for April and softer-than-expected consumer inflation figures [1]. These developments have undermined the AUD and contributed to the selling pressure on the AUD/JPY cross [1].
Conversely, the Japanese Yen has found support from hawkish signals by the Bank of Japan (BoJ). BoJ Deputy Governor Himino Ryozo stated on Tuesday that the central bank will continue to raise the policy rate based on economic activity, prices, and financial conditions [1]. Additionally, speculation that Japanese authorities may intervene to support the Yen has further strengthened the currency and weighed on the AUD/JPY pair [1].
Despite the Yen's recent strength, some caution remains among JPY bulls due to concerns that Japan's economy could face significant challenges if energy supplies through the Strait of Hormuz are disrupted [1]. This has limited the downside for the AUD/JPY cross, with analysts suggesting that strong follow-through selling would be needed to confirm a resumption of the retracement from the multi-decade high of 114.70-114.75 reached earlier this month [1].
According to the latest data, the Australian Dollar was the weakest against the Japanese Yen among major currencies today, declining by 0.28% [1]. The AUD also posted losses against other major currencies, reflecting its broad underperformance in the current market environment [1].
CONCLUSION
The AUD/JPY pair has come under pressure due to reduced RBA rate hike expectations and a stronger Yen, supported by hawkish BoJ commentary and potential intervention speculation. While downside risks remain, concerns over Japan's energy supply disruptions have limited further declines. The market remains cautious, awaiting clearer signals for the next directional move.