AUD/JPY trades around 104.00 after snapping its winning streak amid risk aversion

• AUD/JPY depreciates possibly due to risk aversion sentiment on Tuesday.
• Australia’s Consumer Confidence fell 0.3% MoM in May, marking the third consecutive month of decline.
• This interest-rate disparity puts pressure on the Japanese Yen as investors seek higher returns offered by other assets.

The AUD/JPY pair snapped its six-day winning streak, trading around 104.00 during the European session on Tuesday, likely influenced by a general risk aversion sentiment. However, the AUD/USD pair received minor support following the release of Westpac Consumer Confidence data during the early Asian hours. The index fell by 0.3% month-over-month in May, an improvement compared to a 2.4% decline in April, marking the third consecutive month of decline but at a softer pace.

Additionally, the minutes from the Reserve Bank of Australia’s (RBA) May 2024 meeting expressed that the board considered raising rates but ultimately found the case for maintaining a steady policy to be stronger. Policymakers acknowledged the difficulty in ruling in or out future changes to the cash rate and noted that the recent flow of data had increased the risk of inflation remaining above the target for an extended period.

The Australian Dollar could gain support from China’s announcement of a comprehensive package to bolster its struggling property market. China’s finance ministry plans to raise 1 trillion Yuan by issuing bonds with maturities of 20 to 50 years for larger stimulus measures. These measures include relaxing mortgage rules and encouraging local governments to purchase unsold homes. This development could boost sentiment in the Australian markets, given the close trade relationship between Australia and China.

The Japanese Yen (JPY) may face challenges due to the significant interest rate differential between Japan and other countries. This pressure on the JPY could reinforce the support for the AUD/JPY cross. Market sentiment is shifting toward the possibility that the Bank of Japan (BoJ) may raise interest rates earlier than anticipated, driven by concerns over the weak Japanese Yen.

As per a Reuters report, Japanese Finance Minister Shunichi Suzuki expressed concerns about the negative implications of the weak JPY. Suzuki mentioned that market discussions are focusing on the rising long-term rates and the importance of appropriate national debt policies in Japan. He highlighted hopes for wage hikes to exceed the pace of inflation and stated that he is closely monitoring foreign exchange (FX) movements.