Attention is focused on whether the RBA will raise or hold its policy rate at its scheduled announcement on the 3rd. The market broadly expects a hike to 4.85%, although some expect rates to remain unchanged.
The Australian dollar/yen pair was dominated by Australian dollar buying and yen selling last week. After rising steadily to around ¥110.70 on the 26th, ¥111.00 on the 27th and ¥111.50 on the 28th, it climbed to around ¥111.56 on the 29th. It subsequently fell below ¥111 in the New York market following disappointing earnings from US AI-related companies, and at one point fell to around ¥110.30 in Tokyo trading on the 30th, but has since recovered.
The focus this week is the RBA’s rate announcement. Most of the market expects a hike to 4.85%, while some expect rates to remain unchanged at 4.60%. Rate-hike pricing is just under 80%, and the Australian dollar’s reaction could change depending on the message in the statement. Attention will focus on whether the RBA signals an intention to continue raising rates, indicates that it will pause for the time being, or suggests that the tightening cycle has ended.
Even if the RBA holds off on a rate hike, the future policy stance is expected to determine the sustainability of Australian dollar strength or weakness and the timing of any reversal. Interpreting the statement will be important in judging the Australian dollar’s direction.