AUD/JPY advances to three-week top, around 98.75 zone after RBA’s decision to stand pat

• AUD/JPY attracts some follow-through buying on Tuesday and reacts little to the RBA decision.
• The RBA decided to leave its benchmark interest rates unchanged and stick to its hawkish stance.
• Bets for another BoJ rate hike in 2024 limit the JPY losses and might cap the upside for the cross.

The AUD/JPY cross trades with a mild positive bias during the Asian session on Tuesday and climbs to a three-week top, around the 98.75-98.80 region after the Reserve Bank of Australia (RBA) announced its policy decision. Spot prices now look to build on the recent move up beyond the 50-day Simple Moving Average (SMA). 

As was widely expected, the Australian central bank decided to stand pat for the seventh straight meeting and hold the Official Cash Rate (OCR) steady at 4.35% at its September policy meeting. In the accompanying policy statement, the RBA stuck to its hawkish stance and reiterated that policy will need to be sufficiently restrictive until confidence returns that inflation is moving sustainably towards the target range. This, along with a surprise move by the People’s Bank of China (PBOC) on Monday, to lower its 14-day repo rate by 10 basis points to stimulate the economic recovery, continues to underpin the Australian Dollar (AUD) and lend support to the AUD/JPY cross. 

Meanwhile, the underlying bullish sentiment across the global financial markets is seen undermining the safe-haven Japanese Yen (JPY) and turning out to be another factor acting as a tailwind for spot prices. That said, growing acceptance that the Bank of Japan (BoJ) will raise interest rates again by the end of this year, bolstered by last week’s data showing that Japan’s core inflation rose for the fourth consecutive month, should help limit the JPY losses. Apart from this, persistent geopolitical risk might further contribute to capping gains for the AUD/JPY cross.