- The removal of the AUD/JPY while the AUD is under pressure, driven by the growing RBA rate expectations in May.
- Australia's dollar can find support from the signs of avoiding tensions between the US and China.
- The Japanese Yen weakens the midst of reducing the safe demand for the improvement of global trade sentiment.
The AUD/JPY will stop a three -day winning streak, trading near 91.80 during Europe's early hours on Monday. The currency cross weakened as the Australian dollar (AUD) was under pressure, urged by growing expectations that the Reserve Bank of Australia (RBA) would reduce interest rates through 25 basis of points in May. Increasing economic uncertainty and intensifying concerns in the global trade perspective increase in the downward momentum.
On Thursday, Westpac was expected to lower the RBA rates of 25 basis for the score at May 20's meeting. The policy strategy that relies on RBA data has become difficult to predict its decisions beyond the next meeting with confidence.
The AUD/JPY Cross can be strengthened as Australia's dollar can find support from the signs of avoiding tensions between the US and China, one of Australian's major trading partners. On Friday, China excluded several US imports from its 125% tariffs, boosting the hope that the long trade war between the world's two largest economies could approach a resolution.
However, this optimization was stuck when a Chinese Embassy spokesman told Reuters that “China and the US do not have any consultation or negotiations with tariffs,” urging Washington to “stop creating confusion.”
Meanwhile, the downside for the AUD/JPY Cross may be limited because Japanese Yen (JPY) softens amid improvement of global trade sentiment. Last week, Japanese finance minister Katsunobu Kato and US Treasury Secretary Scott Bessent met privately during the IMF and World Bank meetings in Washington. While Kato offers some details, he emphasized that Japan and the US will maintain close and constructive communication rates, suggesting money issues can feature greater trade discussions.
Risk sentiment FAQ
In the financial jargon world two widely used terms “Risk-on” and “risk off '' refers to the level of risk that investors are ready to stomach during the reference. Moderate.
Usually, during “Risk-on” times, stock markets increase, most goods-besides gold-will also get value, as they benefit from a positive growth perspective. The currencies of countries with heavy goods exporters strengthen due to increased demand, and cryptocurrencies increase. In a “risk-off” market, bonds have climbed-especially the major government bonds-gold shines, and safe currencies like Japanese Yen, Swiss Franc and US dollar all benefit.
The Australian Dollar (AUD), the Canadian dollar (CAD), the New Zealand Dollar (NZD) and minor FX such as the Ruble (Rub) and the South Africa Rand (Zar), all tend to rise in “Risk-On” markets. This is because the economies of these currencies are highly dependent on the exports of goods for growth, and the goods tend to rise in prices in times of risk. This is because investors have found more demand for raw materials in the future due to increased economic activity.
The main currencies that tend to rise during “risk-off” times are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franc (CHF). The US dollar, because it is the world's currency reserves, and because of the hours of the crisis investors buy the US government debt, which is seen as safe because the world's largest economy is unlikely to default. Yen, from increasing demand for Japanese government bonds, as a high proportion is held by domestic investors who are not likely to throw them away – even in a crisis. The Swiss Franc, because the strict Swiss banking laws offers investors improved capital protection.
