AUD/JPY oscillates above 92.00 as odds of a 50 bps rate hike by the RBA advances

• AUD/JPY is balancing above 92.00 on soaring market mood.
• As per the market consensus, the RBA may elevate its interest rates by 50 bps.
• The upbeat Caixin Manufacturing PMI has supported a rebound in the risk barometer.

The AUD/JPY pair is displaying back and forth moves in a narrow range of 92.07-92.30 in the early Tokyo session. The risk barometer has turned sideways after displaying a firmer rebound from Friday’s low around 91.50. This has also marked a rebound in the risk-on impulse.

Investors are underpinning the antipodean against the Japanese yen after testing the monthly low on soaring odds of an extreme hawkish tone by the Reserve Bank of Australia (RBA) in its July monetary policy meeting on Tuesday.  RBA Governor Philip Lowe is likely to hike its Official Cash Rate (OCR) by 50 basis points (bps). This will elevate the OCR to 1.35%.

It is worth noting that the RBA also elevated its interest rates by 50 bps in June. Considering the soaring inflation rate in the aussie economy, a jumbo rate hike looks effective. The aussie agencies have reported the inflation rate for the first quarter of CY2022 at 5.1%.

Apart from the risk-on impulse, the upbeat Caixin Manufacturing Purchase Managers Index (PMI) has also supported aussie. The economic data has landed at 51.7, higher than the estimates and the former release of 50.1 and 48.1 respectively. A higher-than-expected economic data indicate that production activities are operating at a decent pace and the aggregate demand for manufactured products is advancing firmly. The Australian economy is a leading exporter to China and an improvement in Chinese data also supports the antipodean.

On the Tokyo front, the continuation of an ultra-loose monetary policy by the Bank of Japan (BOJ) will weigh pressure on the yen bulls as other nations are suiting up for more rate hike announcements this month. The economy is facing the headwinds of soaring oil and food prices, which have elevated their plain-vanilla inflation rate but not the core Consumer Price Index (CPI).