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AUDJPY Rises 1.8% Amid BOJ Bond Purchase Operation, Focus Turns To RBA

FOREX
  • The Japanese Yen remains softer against all others in G10 on Monday, falling on the back of an unexpected BoJ operation to curb a rise in local bond yields. The Bank's operation was the first of its kind since February, intervening by buying as much as $2bln in JGBs at market rates.
  • USDJPY (+0.78%) spiked in response and eventually traded to a high of 142.68 before consolidating just north of 142.00 for the majority of the US session. Price action leaves the pair at the highest since early July, narrowing the gap with the key bull trigger and medium-term resistance at 145.07.
  • More impressive was the move in AUDJPY and NZDJPY, rising by 1.8% and 1.6% respectively. Antipodean currency strength comes ahead of Tuesday’s RBA rate decision, at which the bank is seen raising rates by 25bps to 4.35%. The moves also follow the mixed China PMI releases overnight. The official PMIs, in aggregate, suggest China's economy lost momentum in July, with the composite index slipping to 51.1 (from 52.3). However, the manufacturing reading beat expectations, with some positive details as well. The market may also be looking through the weaker services read, given efforts in recent weeks to boost consumption growth and potentially easier housing market restrictions.
  • In similar vein, the Canadian dollar has also rallied around half a percent, alongside similar advances for both SEK and NOK, amid constructive price action for crude futures. Both the Euro and the USD index have had traded in tight ranges on Monday, with little impact from month-end rebalancing.
  • Elsewhere in emerging markets, it is worth noting the Chilean Peso is 1.35% lower against the dollar following a more aggressive-than-expected 100bp rate cut late Friday.
  • Aside from the RBA decision, Tuesday’s docket is highlighted by US July ISM Manufacturing PMI and JOLTS Job Openings.
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