During Monday’s European session, the AUD/JPY pair surged to nearly 98.80, potentially buoyed by encouraging Chinese Purchasing Managers Index (PMI) data. The close economic ties between China and Australia likely contributed to this correlation, underlining the significance of developments in the Chinese economy for the Australian dollar.
Investor sentiment towards the safe-haven Japanese Yen (JPY) may have weakened as optimism prevailed following China’s manufacturing sector expansion in March. The first uptick in Chinese manufacturing activity in six months, as reflected in the March PMI figures, likely overshadowed the appeal of the yen as a safe-haven asset.
China’s Caixin Manufacturing PMI surpassed expectations by registering at 51.1, exceeding both forecasts of 51.0 and the previous reading of 50.9. Earlier, on Sunday, China’s National Bureau of Statistics (NBS) reported an uptick in Manufacturing PMI to 50.8 in March from 49.1 in the previous month, accompanied by a rise in Non-Manufacturing PMI to 53.0 from 51.4 in February.
Former Bank of Japan (BOJ) official Tsutomu Watanabe’s remarks hint at a cautious approach by the BOJ, potentially delaying any rate hikes until at least October. Watanabe’s assessment, reported by Bloomberg, underscores concerns surrounding yen depreciation and suggests a data-dependent strategy by the BOJ.
On the other hand, the Australian Dollar (AUD) faced headwinds due to weaker Consumer Inflation Expectations, hinting at potential interest rate cuts by the Reserve Bank of Australia (RBA) later in 2024. Investors await insights from the RBA Meeting Minutes scheduled for Tuesday, seeking clarity on the central bank‘s outlook and future policy trajectory.
