AUD/JPY recovers from day’s low at 91.30, BOJ’s policy eyed

• AUD/JPY has climbed to near 91.68 on an expectation of a neutral stance from the BOJ.
• The BOJ will keep the rates unchanged backed by lower inflation and growth rate.
• Higher inflation in the Aussie area could compel the RBA for a rate hike.

The AUD/JPY pair has attracted offers near 91.60 in the early Tokyo session as investors are eyeing the monetary policy announcement by the Bank of Japan (BOJ) on Thursday. The pair is oscillating in a narrow range of 91.02-91.98 from Wednesday as the uncertainty over the announcement of the interest rate decision by the BOJ has sidelined the market participants.

As per the market consensus, the BOJ will maintain the status quo by keeping the interest rates unchanged. Inflation in Japan at 1.2% has been the highest recorded figure since October 2018 but is still significantly lower than the targeted inflation of 2%. Along with that, the growth rate in Japan has yet not reached its pre-pandemic levels, therefore a rate hike decision is completely out of the sight. So, an ultra-loose monetary policy will remain the key and more stimulus packages could be announced.

Meanwhile, the odds of a rate hike by the Reserve Bank of Australia (RBA) have spurted principally after the Australian Bureau of Statistics reported yearly Australian inflation at 5.1%. The Consumer Price Index (CPI) print came well above the forecast of 4.6%. Also, the quarterly CPI came in at 2.1% against the estimates of 1.7%. The RBA, in its last monetary policy meeting, dictated that they don’t see any real price pressure, which could compel them to announce a rate hike, and adapted a data-dependent approach for further guidance. Now, the table could turn in the favor of hawkish monetary policy in May.