- The AUD/JPY depreciates as the AU is under pressure, driven by the growing expectations of RBA features in May.
- The Australian dollar could find support for signals of relaxation of tensions between the US and China.
- The Japanese yen weakens in the midst of a decrease in the demand for safe refuge due to the improvement of global commercial feeling.
The Aud/JPY pauses its three -day winning streak, quoting about 91.80 during the first European hours on Monday. The crossing of currencies is weakened as the Australian dollar (AUD) is under pressure, driven by the growing expectations that the Bank of the Australian Reserve (RBA) will cut interest rates at 25 basic points in May. The growing economic uncertainties and intensified concerns about global commercial perspectives are adding to the downward impulse.
On Thursday, Westpac predicted that RBA would reduce rates by 25 basic points at its May 20 meeting. The RBA data -dependent policy approach has made it a challenge to predict its decisions beyond the next meeting with confidence.
The Aud/JPY crossing could be strengthened as the Australian dollar could find support for stress relaxation signals between the US and China, one of Australia’s main commercial partners. On Friday, China exempt certain US imports from its 125%tariffs, increasing hope that the prolonged commercial war between the two largest economies in the world could be approaching a resolution.
However, this optimism was moderated when a spokesman for the Chinese embassy told Reuters that “China and the US are not having any consultation or negotiation on tariffs”, urging Washington to “stop creating confusion.”
Meanwhile, the fall for the Aud/JPy crossing could be limited as Japanese (JPY) softens amid the improvement of global commercial feeling. Last week, Japanese Minister of Finance, Katsunobu Kato, and US Treasury Secretary, Scott Besent, met privately during the FMI spring meetings and the World Bank in Washington. Although Kato offered few details, he emphasized that Japan and the US would maintain a close and constructive dialogue about exchange rates, suggesting that currency problems could appear in broader commercial discussions.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
