- AUD/JPY keeps Friday’s retreat from multi-day high, picks up bids of late.
- Mixed concerns over Ukraine-Russia peace ahead of this week’s talks test the bulls.
- Chatters over BOJ, China’s covid resurgence and RBA’s sustained rejection to rate-hike become the key.
- Light calendar emphasizes risk catalysts for fresh impulse.
AUD/JPY remains lackluster around 91.70-75 during the early Monday morning in Asia, following the pullback from a seven-year high.
The cross-currency pair’s latest weakness could be linked to the market’s consolidation of early gains, as well as fears that the Bank of Japan (BOJ) will be pushed to control rates via market intervention. Also challenging the quote is the virus resurgence in China and the indecision over the Russia-Ukraine crisis.
With the yields on the Japanese benchmark Treasury bonds reaching a multi-month high, fears that the BOJ will be forced to intervene in the market, like it did in 2015, renewed JPY strength. “The yield on the 10-year Japanese government bond (JGB) rose to 0.235% on Friday, exceeding the level at which the Bank of Japan offered to buy an unlimited amount of JGBs at 0.25% on Feb. 10,” said Reuters. On the other hand, Australia’s 3-year bond yield rose 11 bps to 2.33%, the highest level since 2014, on Friday.
Also contributing to the AUD/JPY pair’s weakness are the fears that the recent rise in the covid figures in China and Europe will spread faster due to the nature of the virus strain, namely BA.2.
Furthermore, fears that the Russia-Ukraine will have another endless week of negotiations, as well as sustained invasion of Kyiv by Russia, also weigh on the AUD/JPY prices due to its risk-barometer status.
Alternatively, the war-led rally in commodity prices, mainly the metals, joins chatters that the Reserve Bank of Australia (RBA) will also have to reverse from the currently cautious tone towards readiness to hike the rates, to underpin the AUD/JPY upside.
That said, global markets remained confused on Friday and a lack of major data/events can add to the market’s indecision, weighing on the AUD/JPY prices. It’s worth noting that China’s official PMIs and the US jobs report will be the key data for the week while yields and geopolitics remain crucial qualitative catalysts to watch for clear directions.
Unless breaking December 2015 high near 90.72, AUD/JPY stays on the way to 92.70 level comprising August 2015 peak.