AUD/JPY rallies to 93.00 area as global yield rally batters yen, bulls eye recent highs above 94.00

• It was a rough day for the yen as global yields shot higher on expectations of tighter central bank policy.
• AUD/JPY rallied to the 93.00 area and looks on course to post an on-the-day gain of about 0.4%.
• Bulls eye a test of recent highs in the 94.00 area if risk appetite can stabilise and yields keep pushing.

It was a rough day for the yen as yields across developed markets shot higher on expectations of tightened central bank monetary policy, Japanese yields remained anchored near zero with the BoJ over the weekend reiterating its ultra-dovish stance. The yen is very sensitive to changes in rate differentials, which as of late have been more of a driver of the currency than safe-haven flows. That meant that even though it was a risk-off day with tech stocks leading a rout in global equities, and even though the Aussie subsequently performed poorly against most of its G10 counterparts, AUD/JPY was able to rally.

AUD/JPY managed to reclaim the 93.00 level and looks on course to post an on-the-day gain of about 0.4%, though has pared back on a substantial portion of these gains, having been as high as the 93.60s earlier in the day. The bulls will be hoping for a stabilisation in sentiment in global equity and commodity space in the coming days, as that might be enough to propel AUD/JPY beyond recent highs in the 94.00 area.

That’s assuming that global yields continue to trade with an upside bias, which could very well be the case if US inflation data this week jumps as expected, thus solidifying/encouraging further global central bank tightening bets. Traders will also be watching Wednesday’s release of Australian labour market figures, which could help impact RBA tightening expectations. Currently, the bank is seen lifting rates for the first time in the post-pandemic era in June.