AUD/JPY declines towards 92.00 as investors expect Ueda-led BoJ to abolish YCC

• AUD/JPY is expected to extend its correction to near 92.00 as investors see the abolishment of the YCC by the BoJ.
• An abolishment of YCC will provide more returns on yen-denominated assets.
• The RBA has already hiked its interest rates to 3.35% and more hikes are in pipeline to contain the stubborn inflation.

The AUD/JPY pair has turned sideways after a marginal correction to near 92.20 in the early Tokyo session. The risk barometer is expected to deliver more losses as the novel Bank of Japan (BoJ) leadership might abolish the Yield Curve Control (YCC), as reported by Bloomberg, to allow bonds more freedom and more allowance to the central bank to purchase bonds.

Bloomberg reported, “With the nomination for the top BOJ job set to be announced Tuesday, bond traders are wagering on a further tweak to yield curve control sooner rather than later and pricing at an end to negative rates around the middle of the year.”

Earlier, BoJ Governor Haruhiko Kuroda announced a tweak in the YCC of 10-year Japanese Government Bonds (JGBs) yield to rise to 0.5% from the current 0.25%. The move was considered a step towards an exit from the decade-long ultra-expansionary monetary policy by the BoJ.

And, now the abolishment of the YCC by academician Kazuo Ueda after appointing him as a successor of BoJ Governor Haruhiko Kuroda, as expected, will accelerate the hopes that yen-denominated assets might generate more alpha for investors. This will strengthen the Japanese Yen further.

On the Australian Dollar front, investors are awaiting the speech from Reserve Bank of Australia (RBA) Governor Philip Lower for interest rate guidance, scheduled for Wednesday. Inflationary pressures in the Australian economy have not cooled down amid supply chain bottlenecks, which would compel RBA Lowe to sound hawkish for March monetary policy meeting. The RBA has already hiked its interest rates to 3.35% and more hikes are in pipeline to contain the stubborn inflation.