The AUD/JPY currency pair weakened to around 111.10 during the early European session on Friday, as the Japanese Yen edged higher against the Australian Dollar. This move comes amid heightened trader vigilance for potential currency intervention by Japanese authorities, following US President Donald Trump's expression of concern over the Yen's weakness in a meeting with Japanese Prime Minister Sanae Takaichi earlier in the week. Japanese Finance Minister Satsuki Katayama emphasized that excessive currency moves are harmful to the economy and stated that intervention should remain an option to address volatility [1].
Last week, the Bank of Japan (BoJ) raised its policy rate to 1.25%. Governor Kazuo Ueda signaled openness to further tightening, including the possibility of a back-to-back hike in October or a larger move in the future. However, the rate hike was perceived as insufficiently hawkish, with two officials dissenting from the decision [1]. Meanwhile, benchmark 10-year Japanese Government Bond yields have surged to a 30-year high above 3%, prompting traders to remain cautious about committing to domestic bonds as yields continue to climb and policymakers provide limited guidance on future rate increases [1].
On the Australian side, markets widely expect a 25-basis-point rate hike from the Reserve Bank of Australia next week. Thursday's slight increase in unemployment is not anticipated to deter the RBA from its expected course [1].
Analysts at Rabobank note intensifying US strategic pressure on Japan's monetary stance, citing the US Treasury's push for the BoJ to end the Yen Carry Trade via rate hikes. This is seen as potentially triggering a 'perfect storm' for some assets, with the aim of achieving a stronger JPY, cheaper commodity imports, and increased Japanese domestic investment in defense industries. The broader geopolitical context is also becoming more sensitive for Tokyo, with concerns about Japan's autonomy as a middle power [1].
Technically, AUD/JPY maintains a bearish tone below the 100-day simple moving average and the Bollinger middle band. The 14-period Relative Strength Index at 41.70 suggests soft downside momentum, with rallies capped by overhead resistance at 111.70 and the 100-day SMA at 112.80 [1].
CONCLUSION
AUD/JPY is under pressure as bearish technical signals persist and intervention concerns mount, driven by both domestic and international factors. The BoJ's recent rate hike and US strategic pressure are shaping market sentiment, while traders remain cautious amid rising Japanese bond yields. The outlook remains negative for AUD/JPY unless key resistance levels are breached.