AUD/JPY recovers firmly from 92.00 ahead of PBoC’s monetary policy

• AUD/JPY is struggling to extend recovery above 92.30 amid geopolitical tensions.
• The People’s Bank of China is expected to leave the Loan Prime Rate unchanged at 3.65%.
• Japan’s Manufacturing PMI is seen unchanged at 48.9 and the Services PMI higher at 51.5.

The AUD/JPY pair has picked strength after a weak open around 92.10 in the Tokyo session. The risk barometer has recovered to near 92.30 and is looking to extend its rebound move ahead. However, the risk profile seems not to support the risk-perceived assets after the US ambassador to the United Nations, Ambassador Linda Thomas-Greenfield, said Sunday that China would cross a “red line” if the country decided to provide lethal military aid to Russia for its invasion of Ukraine.

Meanwhile, fresh headlines from public broadcaster NHK that Japan's Coast Guard said North Korea launched three projectiles that could be ballistic missiles, as reported by Reuters, has dampened the already negative market mood further.

North Korean leader Kim's sister, Kim Yo Jong has warned against the rising presence of U.S. strategic assets on the Korean peninsula after the United States held joint air exercises bilaterally with South Korea and Japan on Sunday in response to the North's ICBM launch.

For further guidance, investors are awaiting the interest rate decision by the People’s Bank of China (PBoC). A Reuters poll published on February 17 showed that 8 out of 10 economists expect the PBoC to leave the Loan Prime Rate (LPR) unchanged at 3.65%. The Chinese economy is subjected to keeping monetary policy expansionary to spurt economic growth after dismantling pandemic controls.

Bloomberg reported Goldman Sachs sees potential for the MSCI China Index to reach 85 by the end of 2023, an increase of about 24% from current levels as the nation’s economic reopening delivers windfall profits for businesses.

It is worth noting that Australia is a leading trading partner of China and accelerating economic activities in China will support the Australian Dollar.

On the Japanese Yen front, investors will focus on the preliminary Jibun Bank PMI (Feb) data, which will release on Tuesday. The Manufacturing PMI is seen stable at 48.9 while the Services PMI is expected to increase to 51.5 from the former release of 51.1.