AUD/JPY holds losses near 100.50 following verbal interventions from Japanese officials

• AUD/JPY depreciates as Japan’s Finance Minister Katsunobu Kato cautions to take appropriate action to manage fluctuations in the FX market.
• The JPY may face challenges due to uncertainty around the BoJ rate hike plans.
• The AUD struggles as the Trump administration may impose immediate tariffs of 60% on imports from China.

AUD/JPY retraces its recent gains from the previous session, trading around 100.70 during the early European hours on Tuesday. This dip comes as the Japanese Yen (JPY) gains support following new verbal interventions from Japanese officials. Japanese Finance Minister Katsunobu Kato cautioned that authorities would take “appropriate action” to address sharp fluctuations in the foreign exchange market.

However, the Yen’s upside potential remains limited due to uncertainty around the Bank of Japan’s (BoJ) rate-hike plans. The presence of a fragile minority government in Japan is expected to complicate any moves toward monetary tightening. Additionally, the BoJ’s Summary of Opinions from its October meeting indicated a split among policymakers on whether to pursue further rate hikes.

Additionally, the Australian Dollar (AUD) faces downward pressure amid concerns about potential tariff increases on Chinese goods by US President-Elect Donald Trump, as China is one of Australia’s largest export markets. Additionally, China’s latest stimulus measures fell short of investor expectations, raising concerns over demand from Australia’s largest trading partner and further weighing on the AUD.

On a positive note, the Westpac Consumer Confidence index rose by 5.3% to 94.6 points in November, marking its second consecutive month of improvement and the highest level in two and a half years. However, the index has stayed below 100 for almost three years, indicating that pessimists still outnumber optimists.

The Australian Dollar’s downside may be somewhat limited, as Reserve Bank of Australia (RBA) Governor Michele Bullock reaffirmed a hawkish stance after last week’s interest rate hold. Bullock emphasized the need for restrictive monetary policy in light of persistent inflationary pressures and a strong labor market.