AUD/JPY hits 1-week low as RBA holds rates for 3rd meeting

AUD/JPY lost ground sharply on Tuesday after the Reserve Bank of Australia left its cash rate without change at 4.1% at its September meeting, in line with expectations.

The central bank extended the rate pause for a third consecutive month, while adding to market speculation its policy tightening cycle could be over.

Policy makers noted that Australia’s consumer inflation had passed its peak, but still was too high and would probably remain so for some time.

The RBA reiterated some further monetary tightening may be required in order to bring inflation back down to the target range of 2% to 3% within a reasonable time frame.

The RBA Board forecast inflation would slow to 3.25% by the end of 2024 and return within the target range in late 2025.

At the same time, below-trend GDP growth is forecast to continue for a while.

“The RBA’s policy stance overall remains a weight on the Aussie, especially against the US$ where the Fed funds rate seems highly likely to remain 125+ basis points above the RBA cash rate deep into 2024,” Sean Callow, senior analyst at Westpac, was quoted as saying by Reuters.

Australia’s second-quarter GDP growth figures are due to be released on Wednesday. Data may show a 0.3% growth, with persistent inflation and higher interest rates hampering consumer spending.

As of 7:14 GMT on Tuesday AUD/JPY was retreating 0.96% to trade at 93.703. Earlier in the session, the minor Forex pair went down as low as 93.680. The latter has been the pair’s weakest level since August 25th (93.495).

Against the US Dollar, the Aussie was last losing 1.29% on the day, with the AUD/USD pair trading at 0.6377.