AUD/JPY extends its winning streak for the third successive session, trading around 110.00 during the European hours on Wednesday. The currency cross climbed to a record high of 110.18 during earlier hours, supported by the Australian Dollar (AUD) as the Reserve Bank of Australia’s (RBA) tightening cycle kicked off in February.
Markets have raised the probability of a May rate hike to 80% and now price in around 40 bps of additional tightening this year. The RBA lifted the Official Cash Rate (OCR) by 25 bps to 3.85% on Tuesday, citing stronger-than-expected growth and persistently high inflation.
China’s Services Purchasing Managers’ Index (PMI) rose to 52.3 in January from 52.0 in December. This figure came in stronger than the expectations of 51.8. China is a key trading partner of Australia, so any changes in the Chinese economy could impact the AUD.
The AUD/JPY cross also advanced as the Japanese Yen (JPY) weakened ahead of this weekend’s snap lower house election. Prime Minister Sanae Takaichi’s ruling LDP is expected to secure additional seats as she seeks voter support for higher spending, tax cuts, and a new security strategy. Her push for expansionary fiscal policies has fueled concerns over Japan’s fiscal outlook amid fears of debt-funded spending.
Takaichi characterized a weaker Yen as beneficial for export-oriented industries, signaling tolerance for a softer currency, before later clarifying that her remarks were intended to highlight economic resilience to exchange-rate fluctuations.
Source: https://www.fxstreet.com/news/aud-jpy-hits-fresh-record-highs-above-11000-202602040919
