- AUD/JPY may weaken as the Australian Dollar holds losses after China’s NBS PMI data release.
- China’s NBS Manufacturing PMI rose to 50.4, while the Non-Manufacturing PMI increased to 50.1 in March.
- The Japanese Yen gains ground amid rising expectations of possible currency intervention.
AUD/JPY remains steady after registering losses in the previous trading day, hovering around 109.70 during the Asian hours on Tuesday. The currency cross could weaken as the Australian Dollar (AUD) holds losses following the release of China’s NBS Purchasing Managers’ Index (PMI) data. Changes in China’s economy can influence the AUD, given the close trade relationship between the two countries.
China’s NBS Manufacturing PMI rose to 50.4 in March from 49.0 in February, beating expectations of 50.1 and returning to expansion, marking the strongest reading since March last year after two months of contraction. Meanwhile, the Non-Manufacturing PMI increased to 50.1 from 49.5, above forecasts of 49.9, signaling stabilization in the services sector following two months of contraction.
The Reserve Bank of Australia (RBA) released its March Meeting Minutes on Tuesday, indicating that board members agreed further tightening would likely be needed, but differed on the timing. Oil near $100 per barrel is seen capable of lifting June-quarter CPI to around 5%, with the majority concerned that inflation expectations could become unanchored without prompt action.
The AUD/JPY cross may struggle as the Japanese Yen (JPY) draws support from repeated verbal warnings by Tokyo authorities and growing expectations of possible intervention. On Monday, top currency official Atsushi Mimura said the government would act decisively if needed, echoing earlier comments from Finance Minister Satsuki Katayama.
Tokyo Consumer Price Index (CPI) rose 1.4% year-over-year (YoY) in March, easing from a revised 1.5% (revised from 1.6%) in February. Core CPI increased 1.7% YoY, slightly down from 1.8% and below expectations of 1.8%.
Both measures remain below the Bank of Japan’s (BoJ) 2% target. However, analysts see the slowdown as temporary, citing rising oil prices tied to Middle East tensions and higher import costs from the weak JPY, which are likely to push inflation higher in the coming months.
