AUD\/JPY has seen a rise for the second consecutive day due to supportive factors such as Japan’s political uncertainty and potential early elections. The hawkish stance of the Reserve Bank of Australia (RBA) has also contributed to this increase, though a weaker risk tone may limit further gains. <\/p>\n
The AUD\/JPY cross reached the 106.00 mark, the highest since July 2024, during Monday’s European session. The Japanese Yen (JPY) is under pressure due to uncertainty around the Bank of Japan’s next interest rate hike and a deepening rift between Japan and China. <\/p>\n
China’s restriction on exports of dual-use goods, including rare earth elements, has added supply-chain risks for Japanese manufacturers, weakening the JPY further. Additionally, reports of a potential snap election in Japan have added to the Yen’s decline, supporting the AUD\/JPY’s momentum.<\/p>\n
The Australian Dollar benefits from RBA’s potential near-term policy tightening, driving the AUD\/JPY pair’s positive momentum. However, global geopolitical tensions could boost the JPY’s safe-haven status, limiting further gains for the AUD\/JPY. <\/p>\n
The Reserve Bank of Australia influences the Australian Dollar through interest rates and other monetary policies, contributing to economic stability and potentially impacting currency strength. Economic data and central bank policies also play roles in currency valuation, with quantitative easing or tightening affecting the Australian Dollar’s strength.<\/p>\n
We see the AUD\/JPY cross has continued its climb since the analysis from last year, now trading around 108.50. The core reasons for this strength, a hawkish Reserve Bank of Australia and a hesitant Bank of Japan, have largely played out as we expected. This confirms the underlying trend remains intact for now.<\/p>\n
The Reserve Bank of Australia delivered two more rate hikes in late 2025, pushing its cash rate to 4.85% to combat persistent inflation. Australia\u2019s latest quarterly CPI data for Q4 2025 registered at 3.5%, still stubbornly above the central bank’s target range. This keeps the pressure on the RBA to remain hawkish, which supports the Aussie dollar.<\/p>\n
In Japan, the Bank of Japan did finally abandon its negative interest rate policy last year, but its single small hike has been dwarfed by policy tightening elsewhere. Recent core inflation in Japan has dipped back under the 2% target, giving the BoJ cover to delay any further significant moves. This sustained interest rate differential continues to make the yen an attractive funding currency for carry trades.<\/p>\n
We believe long call options on AUD\/JPY are a strategic way to trade this ongoing momentum. This allows traders to capitalize on further upside toward the 110.00 level while clearly defining their maximum risk. Given the persistent geopolitical uncertainty that we saw throughout 2025, managing downside exposure remains critical.<\/p>\n
Implied volatility for the pair remains elevated, reflecting the background risks that have not fully subsided. For those wanting to hedge, buying out-of-the-money puts could provide protection against a sudden “risk-off” event that would strengthen the yen. This balanced approach allows for participating in the uptrend while being prepared for a reversal.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD\/JPY rises as Japan’s political uncertainty and RBA’s hawkish stance support gains despite risk concerns.<\/p>\n","protected":false},"author":62,"featured_media":17045,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-38845","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38845","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/62"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=38845"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/38845\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17045"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=38845"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=38845"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=38845"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}