The AUD/JPY currency pair traded around 110.90 during Asian hours on Thursday, remaining stable after three consecutive days of losses [1]. This sideways movement was supported by comments from Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent, who warned that policymakers may need to tighten policy to contain inflation, especially amid rising energy prices [1]. Kent reiterated the RBA board’s commitment to maintaining low, stable inflation and full employment, suggesting that tighter policy could be necessary to prevent short-term price spikes from affecting long-term inflation expectations [1].
Despite Kent's hawkish tone, the Australian Dollar faced pressure following softer domestic inflation data. Australia's annual Consumer Price Index (CPI) slowed to 3.7% year-on-year in February, down from 3.8% in January. The trimmed mean CPI was 3.3%, below the 3.4% forecast and matching January’s revised figure [1].
On the Japanese side, the Yen drew support from rising expectations of a near-term rate hike by the Bank of Japan (BoJ), driven by an oil-led inflation shock linked to the Middle East conflict. Although the BoJ kept its policy rate unchanged in March, Governor Kazuo Ueda indicated the possibility of a move in April [1]. Japanese Government Bond yields rose, with the 10-year yield climbing to 2.27% on Thursday, ending a two-day decline. Shorter maturities also advanced, with 2-year yields reaching three-decade highs and 5-year yields hitting record levels, signaling tightening financial conditions and increased expectations of higher interest rates in Japan [1].
Market participants are closely watching central bank signals from both Australia and Japan, as persistent price pressures and global events continue to influence monetary policy outlooks. The stability in AUD/JPY reflects a balance between dovish domestic data in Australia and hawkish policy signals from both the RBA and BoJ [1].
CONCLUSION
AUD/JPY remained stable near 111.00 as central bank policy signals and inflation data shaped market sentiment. Softer Australian inflation weighed on the AUD, while expectations of a BoJ rate hike and rising Japanese bond yields supported the JPY. The market is awaiting further policy moves from both central banks, with tightening financial conditions likely to impact future currency movements.