The AUD/JPY currency pair has experienced a consistent decline over the past five trading sessions, with investors speculating that the Bank of Japan (BoJ) may make adjustments to its Yield Curve Control (YCC) in its upcoming interest rate policy announcement scheduled for July 28.
For the past ten years, the BoJ has maintained an extremely accommodative monetary policy due to weak overall demand, resulting in inflation rates remaining below the desired level.
However, with inflation in Japan increasingly driven by demand factors such as rising wages and fading inflationary pressures from higher import prices, there is a possibility that BoJ Governor Kazuo Ueda may consider modifying the YCC as overall demand recovers.
On the other hand, despite a hawkish statement from Reserve Bank of Australia (RBA) Governor Philip Lowe, the Australian Dollar is facing challenges in finding support. Governor Lowe has indicated potential future policy tightening due to the complex nature of inflation and its outlook. Lowe cautioned that economic growth will likely remain subdued in the coming years.
The RBA has recently made adjustments to its monetary policy framework, planning to conduct monetary policy meetings eight times per year starting from the next year, down from the previous 11 meetings.
Additionally, the Australian government is currently searching for a successor to oversee monetary policy operations as Philip Lowe’s tenure is approaching its end.
Looking ahead, investors will closely monitor the release of forward-year consumer inflation expectations, scheduled for Thursday at 1:00 GMT. It is anticipated that the economic data will show a slight softening to 5.1%, compared to the previous release of 5.2%.
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