- AUD/JPY softens to around 96.50 in Wednesday’s Asian session.
- Australia’s CPI inflation eases to 0.7% QoQ in Q2, softer than expected.
- Political risks in Japan could weigh on the Japanese Yen and help limit the losses for the cross.
The AUD/JPY cross edges lower to near 96.50 during the Asian trading hours on Wednesday. The Australian Dollar (AUD) weakens against the Japanese Yen (JPY) after the softer-than-expected Australian inflation data. Traders will take more cues from the Australian June Retail Sales report, which is due later on Thursday.
Data released from the Australian Bureau of Statistics (ABS) on Wednesday revealed that the country’s Consumer Price Index (CPI) increased 0.7% QoQ in the second quarter (Q2), compared to a rise of 0.9% in Q1. This figure came in below the market consensus of 0.8% in the reported period.
Meanwhile, Australia’s CPI inflation eased to 2.1% YoY in Q2 from 2.4% in Q1 and was softer than the expectation of 2.2%. The monthly Consumer Price Index rose by 1.9% YoY in June versus 2.1% prior. The Aussie attracts some sellers in an immediate reaction to the softer inflation data.
The Japanese Yen remains weak as political risks mount. The ruling Liberal Democratic Party’s defeat in the July 20 elections creates a headwind for the JPY and might cap the downside for the cross. Analysts believe that Japanese Prime Minister Shigeru Ishiba may resort to populist spending to shore up support for his weakened coalition.
“While the election has passed, there are still some political risks with the potential for PM Ishiba to step down and for an LDP leadership election in September,” said Derek Halpenny, MUFG Bank’s head of global markets research.
The first waves from the tsunami have hit the coastline of Hokkaido in northern Japan. Broadcaster NHK stated that the waves measured around 30 cm. Officials in multiple countries, including Russia and the US Pacific coasts, have issued warnings that subsequent waves could be much higher. Traders will keep an eye on the further developments surrounding the Japan tsunami warning.
