Insights 
VT 
The AUD/JPY maintains its position near 99.35 in the early European session on Friday. Optimistic prospects for US-China trade discussions are lending some support to the Australian Dollar against the Yen.
The easing of trade tensions between the US and China benefits the Aussie. With high-level trade talks planned in Malaysia, US and Chinese representatives will discuss various issues, including trade and nuclear weapons limits.
Potential Impact Of Presidential Meeting
The potential meeting between the US and Chinese presidents at the Asia-Pacific Economic Cooperation summit might further influence the Aussie. China’s key trading role with Australia is a factor in this dynamic.
The Japanese Yen weakens against the AUD despite a rise in Japanese core inflation in September. Analysts expect the Bank of Japan to keep interest rates unchanged at its upcoming meeting.
Markets have delayed the expectation of a rate hike to December, with most seeing it later. This situation might restrict the Yen’s potential gains, though market caution could strengthen its safe-haven appeal.
The Japanese Yen is impacted by several factors, including the Bank of Japan’s policies and the Japanese and US bond yield differential. The Yen, known as a safe-haven currency, often attracts money during turbulent times due to its stability.
Strategies For A Rising AUD/JPY
Optimism surrounding the US-China trade talks is giving the Australian dollar a lift, keeping the AUD/JPY cross firm above 99.50. We see this trend continuing as high-level negotiations begin today in Malaysia, ahead of the presidential meeting next Thursday. This positive sentiment creates a favorable environment for the Aussie, given its status as a proxy for the Chinese economy.
Recent data from the Australian Bureau of Statistics supports this view, showing exports to China rose by 3.2% in the third quarter of 2025, primarily driven by strong demand for iron ore. This fundamental link reinforces the Aussie’s sensitivity to any good news from the trade negotiations. We believe a successful outcome could push the currency pair significantly higher.
On the other side of the trade, the Japanese Yen is likely to remain weak. Japan’s national Core CPI for September, released last week, came in at 1.9%, still below the Bank of Japan’s 2% target. This makes it highly probable that the BoJ will maintain its current interest rates at its meeting next week, limiting any potential strength for the Yen.
Given this backdrop, we should consider strategies that benefit from a rising AUD/JPY. Buying near-term call options with a strike price around 99.75 and an expiry date after next week’s summit could capture potential upside from a trade deal. This approach allows us to capitalize on a positive outcome while limiting our initial risk.
However, the risk of these talks collapsing is real and would likely trigger a flight to safety, strengthening the Yen. We should therefore consider a small allocation to out-of-the-money put options as a hedge against a sharp reversal. This protects our portfolio from a sudden downturn if the summit disappoints markets.
