AUD/JPY extends its gains for the second successive sessions, trading around 109.40 during the European hours on Tuesday. The currency cross gains ground as the Australian Dollar (AUD) gained over 1% against the Japanese Yen (JPY) after the Reserve Bank of Australia’s (RBA) decided to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% from 3.6%, as expected.
The AUD/JPY cross remains stronger after the cautious remarks from the RBA Governor, Michele Bullock, during the post-meeting press conference. Bullock said inflation pressures remain too strong, warning it will take longer to return to target and is no longer acceptable. She stressed the board will stay data-dependent and avoid forward guidance.
The AUD/JPY cross could extend its gains as the Japanese Yen finds support amid political uncertainty ahead of the February 8 snap election, with Prime Minister Sanae Takaichi’s ruling party expected to gain seats and pursue expansionary fiscal policies.
Over the weekend, Takaichi described a weak Yen as an opportunity for export-driven industries, signaling tolerance for a softer currency. She later clarified the comments were meant to stress economic resilience to exchange-rate swings, while Finance Minister Satsuki Katayama said the remarks reflected standard economic principles on the effects of a weaker currency.