AUD/JPY aims to recapture seven-year high near 97.00 on dovish BOJ bets

• AUD/JPY is aiming to recapture a seven-year high at 96.90 on expectations of wider RBA-BOJ policy divergence.
• RBA minutes have shown hawkish guidance amid soaring price pressures.
• A dovish commentary is expected by the BOJ in its monetary policy meeting on Thursday.

The AUD/JPY pair has continued its five-day winning streak and is marching to recapture its seven-year high at 96.90. The risk barometer has been strengthened by the market participants on escalating odds of wider divergence in Reserve Bank of Australia (RBA)-Bank of Japan (BOJ) policy.

The aussie bulls are performing stronger against Tokyo after the release of July’s monetary policy minutes by the RBA. The guidance provided by RBA policymakers is hawkish as price pressures are soaring in the Australian economy. While the RBA is focused on bringing price stability sooner.

At the press time, RBA Governor Philip Lowe is speaking at ''The Australian Strategic Business Forum – Melbourne'' on Inflation, Productivity, and the Future of Money. The comments from RBA Lowe indicate that investors should brace for higher inflation in June. To contain price pressures, the RBA will dictate more rate hikes over the months ahead.

This week, the Australian S&P PMI data will be of utmost importance. The Manufacturing PMI may step up to 56.4 vs. 56.2 in the prior figure. While the Services PMI is seen significantly higher at 55 than the prior release of 52.6.

On the Tokyo front, the announcement of the interest rate decision by the BOJ on Thursday will be the show-stopper event. A dovish commentary is expected from BOJ Governor Haruhiko Kuroda as the central bank is committed to pushing the aggregate demand in the economy. The central bank is focusing on keeping the inflation rate above 2% and to address the same the wage price index is needed to elevate as a higher inflation rate and lower wage levels could enlarge the real income shock.