AUD/JPY advances towards 94.00 on expectations of wider RBA-BOJ policy divergence

• AUD/JPY is aiming to recapture its weekly high at 94.26.
• The upbeat Aussie employment data has empowered the RBA to accelerate rates unhesitatingly.
• Australia’s Consumer inflation expectations have trimmed to 6.3% vs. 6.7% recorded earlier.

The AUD/JPY pair is advancing firmly to reclaim its weekly high at 94.26 as the odds of a wider Reserve Bank of Australia (RBA)-Bank of Japan (BOJ) policy divergence is underpinning the aussie bulls. Broadly, the risk barometer is sideways in a wider range of 91.42-94.26 in July and is awaiting a potential trigger that could bring a decisive move.

The antipodean is performing well against the yen bulls on the release of the upbeat Australian employment data. The Australian Bureau of Statistics reported the Employment Change at 88.4k while the Unemployment Rate has trimmed to 3.5%. As per the market consensus, the Australian economy was expected to report an addition of 25k jobs in its labor market. Also, the jobless rate was seen at 3.8%.

This has delighted the RBA to tighten its policy further without much hesitation. Last week, the RBA elevated its Official Cash Rate (OCR) by 50 basis points (bps) to 1.35%. The inflation rate is sky-rocketing in the aussie zone and in order to tame the same, the RBA will elevate its OCR continuously.

Apart from that, the consumer inflation expectations have been trimmed on a decent note. The inflation indicator landed at 6.3%, lower than the prior release of 6.7% but remained higher than the expectations of 5.9%. This indicates that the policy tightening measures have started showing their multiplier effects.

On the Tokyo front, the BOJ’s ultra-loose monetary policy will widen the policy divergence with other nations. BOJ governor Haruhiko Kuroda is committed to its dovish commentary in order to spurt the aggregate demand in its respective economy.