AUD/JPY Drops Amidst Growing Risk Aversion Over China’s Economic Worries
AUD/JPY sees a downturn after a four-day rally, hovering around 98.40 in the European session on Tuesday. The decline in the AUD/JPY pair is linked to increased risk aversion as traders proceed with caution due to mounting concerns about the Chinese economy.
Investors are closely monitoring China’s July manufacturing PMI data, as China is a major trading partner of Australia. Official reports show a significant drop in factory activity, while private surveys suggest some growth in the manufacturing sector.
Attention is now on Australia’s Q2 Gross Domestic Product (GDP) and July Trade Balance data, along with an upcoming speech by Reserve Bank of Australia (RBA) Governor Michele Bullock, to gain more clarity on the central bank’s monetary policy stance.
Meanwhile, Japan has allocated ¥989 billion towards energy subsidies to combat rising energy costs and the resulting inflationary pressures. This move by the government could potentially contribute to inflation in the country.
The Bank of Japan (BoJ) maintains a hawkish monetary policy, supported by a recent uptick in Tokyo’s inflation rates. Consumer Price Index (CPI) rose to 2.6% year-on-year in August, up from 2.2% in July, while core CPI increased to 1.6% YoY in August, compared to 1.5% in the previous month.
Analysis: The AUD/JPY pair is facing downward pressure due to concerns about China’s economic health, while Japan’s efforts to manage energy costs could impact inflation. Investors should keep an eye on upcoming data releases and central bank speeches to gauge the market’s direction and make informed investment decisions.