AUD/JPY Drops as BoJ Holds Rates, RBA Hike Bets Rise

Key Moments

Yen Strength Weighs on AUD/JPY After BoJ Decision

AUD/JPY remains under pressure for a second consecutive session, trading near 110.80 during Asian hours on Friday. The cross continues to hold losses as the Japanese Yen (JPY) stays firm following the Bank of Japan’s latest policy outcome.

The BoJ’s policy board opted to maintain the short-term interest rate at 1.25% at the conclusion of its two-day monetary policy review. The decision matched prior expectations, with no change from the previous 1.25% level.

RBA Tightening Expectations Offer Support to Australian Dollar

Downside in the AUD/JPY pair may be cushioned by ongoing support for the Australian Dollar (AUD), driven by market expectations of further policy tightening by the Reserve Bank of Australia (RBA). Stronger-than-anticipated inflation data and hawkish commentary from RBA officials have prompted markets to increasingly anticipate another rate increase at the central bank’s upcoming November 3 meeting.

As of October 29, the ASX 30-day interbank cash rate futures November 2026 contract was trading at 95.22. This pricing pointed to an 80% implied probability that the RBA will raise the cash rate to 4.85% at its next Board meeting.

TD Securities: One Final RBA Hike in the Cycle

Analysts at TD Securities highlighted that a firmer third-quarter CPI reading has strengthened expectations for additional RBA action in the near term. The institution now projects that the RBA will “lift the cash rate 25bps at next week’s meeting to 4.85%,” stating that the stronger inflation result “validates the Bank’s decision to hike last month” and that “likely forecast upgrades to the Bank’s inflation track in the November Statement on Monetary Policy likely justify a follow-up 25bps hike next week.” TD Securities further notes that this “hike should mark the last in the cycle,” indicating that the tightening phase is approaching its conclusion.

BoJ Interest Rate Decision – Latest Release Details

The Bank of Japan’s interest rate announcement, following one of its scheduled annual meetings, is a key event for JPY traders. The stance of the central bank on inflation and growth typically guides market expectations for the currency.

In general, a more hawkish tone from the BoJ that involves raising interest rates is viewed as supportive for the Japanese Yen. Conversely, a dovish posture characterized by holding rates steady or cutting them is typically considered negative for JPY.