AUD/JPY drops to near 94.00 on flat Chinese imports data, BOJ policy remains a key

• AUD/JPY has declined after failing to recapture an intraday high at 95.43 amid flat Chinese imports data.
• The RBA may return to a 50 bps rate hike pace amid higher consensus for Aussie CPI.
• A continuation of an ultra-dovish monetary policy by the BOJ looks likely.

The AUD/JPY pair dropped again after an attempt to recapture an intraday high at 95.43. The risk barometer has sensed selling pressure despite the release of downbeat China’s economic data. Meanwhile, overall risk impulse is solid as S&P500 futures are holding their morning gains, followed by an upbeat Friday.

China’s Gross Domestic Product (GDP) data for annual and quarterly segments have soared to 3.9%, higher than their projections. The overall Trade Balance has accelerated to $84.74B vs. the expectations of $81.0B and the prior release of $79.39B. China’s export data has remained upbeat while their imports have remained flat at 0.3%, much lower than the estimates of 1%.

As Australia is a leading trading partner of China, lower-than-projected Chinese import data has impacted the aussie bulls.

This week, aussie investors will focus on Wednesday’s Consumer Price Index (CPI) data. On an annual basis, the headline CPI figure will accelerate to 6.9% vs. the former release of 6.1%. While a decline to near 1.5% is expected from the prior settlement of the inflation rate at 1.8% on a quarterly basis. This may force the Reserve Bank of Australia (RBA) to return to the 50 basis points (bps) rate hike structure.

Meanwhile, yen investors are awaiting more development on the Bank of Japan (BOJ) intervention in the currency markets to safeguard the Japanese yen against one-sided speculative moves. Japanese officials have denied commenting on whether they have intervened in currency markets or not. However, analysts at National Australia Bank (NAB) in Sydney have cited that “It’s blindingly obvious that the BOJ is intervening,”

Going forward, the Bank of Japan (BOJ)’s monetary policy will remain the key. Considering the risk of external demand shocks cited by BOJ Governor Haruhiko Kuroda last week, the central will stick to its ultra-loose monetary policy.