AUD/JPY Outlook:
The AUD/JPY is slightly positive and likely to move sideways as it's trading above its recent average and within the mid-range of its three-month volatility. Commonwealth Bank expects the AUD/JPY to reach 112 yen by year’s end.
Key drivers:
• Rate gap: The Reserve Bank of Australia's cautious policy contrasts with the Bank of Japan's recent interest rate hike, affecting the value of the AUD relative to the JPY.
• Risk/commodities: Rising oil prices have pressured the yen, raising Japan's import costs and making the Australian dollar relatively more attractive.
• A significant driver: Improved consumer confidence in Australia could support the AUD's strength against the JPY.
Range:
Expect AUD/JPY to hold around current levels while navigating a volatile range influenced by external factors.
What could change it:
• Upside risk: Further easing of geopolitical tensions could enhance Australian exports, supporting the AUD.
• Downside risk: Renewed concerns over fiscal stability in Japan may exacerbate JPY weakness, but heightened risks could also impact the AUD negatively.