AUD/JPY drops to near 94.50 after weak Aussie Employment data, PBoC policy eyed

• AUD/JPY drops as the Australian Dollar faces pressure due to weak labor demand.
• Investors await the PBOC policy, which will be announced on Friday.
• The expectations of BoJ’s intervention in the FX domain ease.

The AUD/JPY pair faced a sell-off after the release of the mixed Australian labor market data. The risk-barometer drops to near 94.50 and is expected to remain on the tenterhooks ahead of the interest rate decision by the People’s Bank of China (PBoC), which will be announced on Friday. The PBoC is expected to maintain a dovish policy due to persistent deflation risks in China.

The market mood remains downbeat amid deepening Middle East tensions, which has dampened demand for risk-perceived currencies.

The Australian Bureau of Statistics reported on Thursday that employers added marginally 6.7K employees in September, significantly lower than expectations and the former release of 20K and 63.3K, respectively. While the Unemployment Rate dropped to 3.6% against the estimates and the former release of 3.7%.

A downbeat Australian Employment data dampens expectations of one more interest rate increase by the Reserve Bank of Australia (RBA) in the remainder of 2023.

The hopes of an intervention from the Japanese authority into the FX domain are diminishing. Japanese authorities are worried about further sell-off in the Japanese Yen and are holding volatile moves responsible for them. Historically, volatility spikes remain for days for a few weeks but the appeal for the Japanese Yen is weak from some quarters due to the adaptation of easy monetary policy by the BoJ. Therefore the authorities cannot reverse the tide against weak appeal for the Japanese Yen backed by expansionary monetary policy.