AUD/JPY gauges an intermediate cushion around 90.00 despite RBA considering rate pause

• AUD/JPY is looking for a cushion around 90.20 despite less-hawkish remarks from RBA Lowe.
• The RBA may pause its aggressive rate hike cycle amid the presence of signs of inflation softening.
• Last BoJ Kuroda’s monetary policy announcement is likely to be dovish.

The AUD/JPY pair is building a firm cushion around 90.20 in the early Asian session. The risk barometer is displaying signs of exhaustion in the downside momentum. It seems that the cross is building ground for a fresh move ahead of the interest rate decision by the Bank of Japan (BoJ), which is scheduled for Friday.

Meanwhile, commentary from Reserve Bank of Australia (RBA) Governor Philip Lowe has failed to trigger any reaction from the Australian Dollar. RBA Lowe cited “The central bank is closer to pausing its aggressive cycle of rate increases as the policy is now in the restrictive territory and there are signs the economy was responding.” However, economists at ANZ Bank believe that the RBA will deliver more hikes in April and May to a peak of 4.1%.

On Tuesday, the RBA said, “Monthly Consumer Price Index (CPI) indicator is confirming a peak in Australian inflation.” The statement came after a fifth consecutive 25 basis points (bps) rate hike announcement by RBA Lowe, which pushed the Official Cash Rate (OCR) to 3.60%

Investors should be aware of the fact that Australia’s monthly CPI (Jan) dropped to 7.4% from the former release of 8.4%.

Apart from that, RBA Lowe has said “China reopening is positive for our economy,” while also adding that no particular implications for inflation from China reopening. It is worth noting that Australia is a leading trading partner of China and the upbeat Chinese economic outlook also supports the Australian Dollar.

Meanwhile, investors in Tokyo are preparing for the BoJ monetary policy meeting scheduled for Friday. This will be the last monetary policy meeting to be announced by BoJ Governor Haruhiko Kuroda and maintenance of expansionary policy is highly expected.

The street is skeptical about tweaking yield curve control (YCC) further as the majority of inflationary pressures in the Japanese economy are coming from international forces and wages and domestic demand seems incapable of keeping the inflation rate above 2%.