AUD/JPY moves below 96.50 due to market caution, robust Japan’s PPI

• AUD/JPY depreciates as traders exercise caution ahead of the US CPI report.
• The Australian Dollar faced challenges as the RBA Governor Bullock stated that upside inflation risks have eased.
• The JPY gained ground as robust Japan's PPI data suggested the possibility of further BoJ’s rate hikes.

AUD/JPY continues to lose ground for the second successive day, trading around 96.30 during early European hours on Wednesday. The risk-sensitive Australian Dollar (AUD) faces challenges against its major peers due to market caution ahead of crucial US November Consumer Price Index (CPI) data, which are expected to be released later in the North American session.

The downside of the AUD/JPY cross could be attributed to a weaker Aussie Dollar following less hawkish remarks from the Reserve Bank of Australia (RBA) Governor Michele Bullock in the post-meeting conference held on Tuesday.

RBA Governor Bullock highlighted that while upside inflation risks have eased, they persist and require ongoing vigilance. Bullock also stated that the RBA will closely monitor all economic data, including employment figures, to guide future policy decisions. The Reserve Bank of Australia decided to keep the Official Cash Rate (OCR) unchanged at 4.35% in its final policy meeting in December.

The AUD/JPY pair faced downward pressure due to a stronger Japanese Yen (JPY), driven by robust Producer Price Index (PPI) data, which suggests the possibility of further policy tightening by the Bank of Japan (BoJ).

However, the JPY lacks strong bullish momentum, as uncertainty lingers over the BoJ’s willingness to implement another rate hike in December. While BoJ Governor Kazuo Ueda recently hinted that the timing for the next rate hike is approaching, supported by solid underlying inflation data, dovish BoJ board member Toyoaki Nakamura has warned against premature rate increases, adding to the skepticism surrounding the BoJ’s policy direction.