AUD/JPY reclaims 94.00, RBA hikes OCR by 25 bps lower-than-projection of 50 bps

• AUD/JPY has recovered sharply and is oscillating around 94.00.
• The RBA has elevated its OCR by 25 bps to 2.6% and has ditched the 50 bps rate hike spell.
• The continuous firing of ballistic missiles by North Korea has raised questions over international peace.

The AUD/JPY pair has after the announcement of the interest rate decision by the Reserve Bank of Australia (RBA). RBA Governor Philip Lowe has elevated the interest rates by 25 basis points (bps). The extent of the rate hike by the central bank is lower than the expectations of a 50 bps rate hike.

Market participants were expecting that the RBA will announce a fifth consecutive 50 bps rate as price pressures have not displayed any sign of exhaustion yet. The rate hike announcement of 50 bps would have pushed the Official Cash Rate (OCR) extremely closer to the target rate of 3.85%. After a rate hike of 25 bps, the OCR stands at 2.6%.

It is worth noting that the option of a rate hike by 25 bps was also into consideration by the RBA. The central bank discussed the 25 bps rate hike option in its September monetary policy meeting, as dictated in RBA minutes. It seems that the RBA wants to take the growth prospects simultaneously with the foremost agenda of bringing price stability.

On the Tokyo front, investors are worried over demolished harmony in Japan as North Korea had been reported to have fired another ballistic missile over the north of the country. In response to that, Japan administration has urged residents to take shelter.

Japanese Prime Minister Fumio Kishida cited that recent repeated ballistic missile launches are outrageous and we strongly condemn them while addressing the media on Tuesday morning.

On the economic data front, the Statistics Bureau of Japan has released the Tokyo Consumer Price Index (CPI) data. The headline CPI has remained lower at 2.8% than the projections of 3.0% and the prior release of 2.9%. While the core CPI has escalated to 1.7% vs. the expectations of 1.5% and the prior print of 1.4%.