AUD/JPY surges to all-time high near 99.00 on improved Australian private sector activity

• AUD/JPY surged to an all-time high as the Australian ASX 200 Index rose higher.
• BoJ could delay the plan of exiting from negative rates as Japan entered into a technical recession.
• Australian Dollar strengthened as recent PMI data indicated that February's economic activity returned to growth.

AUD/JPY rises to an all-time high near 99.00 during the European session on Friday, extending its winning streak that commenced on February 14. Market participants are concerned about the potential delay in the Bank of Japan's (BoJ) plan to exit from negative interest rates in the near term, particularly after last week's data showed that the Japanese economy entered into a technical recession. This downward pressure on the Japanese Yen (JPY) provides support for the AUD/JPY cross.

Furthermore, the surge in global money markets, as investors digest dashed hopes for interest rate cuts by major central banks worldwide, is exerting downward pressure on the safe-haven Japanese Yen (JPY). Conversely, Australia’s S&P/ASX 200 index moved higher following the overnight surge on Wall Street, which provides upward support for the Australian Dollar (AUD). This collective dynamic is contributing to the strength of the AUD/JPY cross.

Furthermore, investors persist in borrowing Japanese Yen (JPY) to invest in higher-yielding assets denominated in other currencies. However, recent verbal intervention by Japanese authorities may offer some support for the JPY. Vice Finance Minister for International Affairs Masato Kanda stated last week that authorities would take necessary actions if required.

Earlier in the week, the Japanese Yen received a boost from better-than-expected Trade Balance figures released by the Ministry of Finance of Japan. Market participants are now eagerly awaiting the release of Japan’s National Consumer Price Index (CPI) data scheduled for Tuesday.

The Australian Dollar (AUD) received upward support from domestic PMI data indicating that private sector activity returned to growth in February for the first time in five months, driven by a robust expansion in the services sector. Furthermore, the Aussie Dollar was buoyed by market sentiment suggesting the likelihood of no immediate rate cuts following the recent Meeting Minutes from the Reserve Bank of Australia (RBA).