AUD/JPY reverses softer Australian CPI-led slide, flat lines around 99.00 mark

• AUD/JPY attracts some dip-buying amid the dovish BoJ-inspired selling around the JPY.
• The initial market reaction to softer Australian consumer inflation fades rather quickly.
• Intervention fears help limit losses for the JPY and should cap the upside for the cross.

The AUD/JPY cross manages to recover a few pips from the Asian session low and currently trades just below the 99.00 round-figure mark, nearly unchanged for the day.

The Australian Dollar (AUD) meets with some supply after the official data showed that domestic consumer inflation rose by the 3.4% YoY rate in February as compared to expectations for an uptick to 3.5%. The initial market reaction, however, turns out to be short-lived amid growing acceptance that any potential rate cuts by the Reserve Bank of Australia (RBA) will commence in the second half of the year. This, along with the prevalent selling bias surrounding the Japanese Yen (JPY), assists the AUD/JPY cross to attract some dip-buying near the 98.75-98.70 region.

Despite the historic move rate hike for the first time since 2007, the Bank of Japan (BoJ) struck a dovish tone at the end of the March meeting and stopped short of offering any guidance about future policy steps, or the pace of policy normalization. Adding to this, the BoJ indicated that it intends to maintain an accommodative monetary policy for an extended period, which continues to undermine the JPY and lends some support to the AUD/JPY cross. The upside, however, seems limited amid speculations that authorities will intervene in the markets to stem any further JPY weakness.

In fact, Japan's Finance Minister Shunichi Suzuki reiterated that he won't rule out any decisive steps to respond to disorderly FX moves. This comes after Japan's top currency diplomat Masato Kanda earlier this week labelled the recent moves as speculative and said that the current JPY weakness does not reflect fundamentals. This, in turn, warrants some caution for bullish traders and positioning for any further near-term appreciating move for the AUD/JPY cross.