AUD/JPY moves above 96.00 after paring losses, possibly on improving risk sentiment

• AUD/JPY is recovering its daily losses, possibly due to a risk-on mood amid the Federal Reserve’s expected interest rate cut.
• The Japanese yen is getting support from bullish sentiment around the BoJ’s policy outlook.
• The Australian dollar may appreciate due to the aggressive monetary policy approach of the Reserve Bank of Australia.

AUD/JPY pared its intraday losses, trading around 96.10 during European hours on Wednesday. However, the AUD/JPY cross may have losses as the Japanese yen (JPY) receives support from bullish sentiment around the Bank of Japan’s (BoJ) policy outlook.

Traders await the US Federal Reserve’s (Fed) interest rate decision, scheduled to be released later in the North American session. Focus will shift to the BoJ’s policy decision on Friday, with expectations to keep rates unchanged while leaving open the possibility of further rate hikes.

Japanese Finance Minister Shunichi Suzuki said on Tuesday that rapid fluctuations in the exchange rate were undesirable. Suzuki stressed that officials will closely monitor how currency movements affect the Japanese economy and people’s livelihoods. The government will continue to assess the impact of a stronger Japanese yen and respond accordingly, according to Reuters.

AUD/JPY’s downside could be narrowed as the Australian Dollar (AUD) receives support from the Reserve Bank of Australia (RBA) on the monetary policy outlook. RBA governor Michele Bullock said it was premature to consider rate cuts because of persistently high inflation. In addition, RBA Deputy Governor Sarah Hunter noted that while the labor market remains tight, wage growth appears to have peaked and is expected to slow further.

Investors now await Australian jobs data, including the change in employment and the unemployment rate for August, due out on Thursday. This report can provide insights into the health of the labor market and influence expectations about the future direction of domestic monetary policy.