AUD/JPY - This rate is the FX market's bellwether for risk sentiment and this key cross-rate reached an 8 year high around 95 as we approach the end of the year.
In the second half of 2022 the Aussie to yen rate is still near multi year highs due to a weak yen and a strong rebounding Aussie dollar as the RBA began to raise interest rates, the first rises for a decade.
Markets are split on whether or not to expect the AUD/JPY rate to continue heading towards the 100 level.
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Any souring of risk appetite almost always sees the AUD/JPY pair push lower. The Australian Dollar normally strengthens when risk appetite is healthy while the opposite follows. As for the Yen, it’s the opposite. The Japanese currency will rise when risk appetite sours.
In 2022 the Aussie is benefiting from the oil and gas price surges due to the war in Ukraine.
The Bank of Japan has been resisting the global wave of monetary tightening keeping interest rates unchanged.
The yen, as a result, has lost considerable ground against the U.S. Dollar (USD) in 2022. For reference, in January USD/JPY was around 115 and in October trading around 144 — a multi decade LOW for the yen.
The Aussie dollar rebounded from around US62¢ in October and November on the suggestion that the RBA would slow the pace of interest rate hikes.
However, economists are divided as to whether this change in fortunes for the Australian dollar will continue into the new year.
Disclaimer: Please note any provider recommendations, currency forecasts or any opinions of our authors should not be taken as a reference to buy or sell any financial product.