AUD/JPY advances to three-week high around 98.75 area after RBA decision to hold

• AUD/JPY attracts some further buying on Tuesday and reacts little to the RBA decision.
• The RBA decided to leave its benchmark interest rates unchanged and maintain its stance.
• Bets on another BoJ rate hike in 2024 limit losses in the JPY and could limit upside for the crossover.

AUD/JPY is trading in a mild uptrend during the Asian session on Tuesday and is climbing to a three-week high around the 98.75-98.80 region after the Reserve Bank of Australia (RBA) announced its policy decision . Spot prices now appear to be based on the recent move beyond the 50-day simple moving average (SMA).

As expected, Australia’s central bank decided to hold its seventh consecutive meeting and keep the official cash rate (OCR) steady at 4.35% at its September policy meeting. In the accompanying policy statement, the RBA maintained its stance and reiterated that policy will need to be sufficiently tight until confidence returns that inflation is moving sustainably towards the target range. This, along with a surprise move by the People’s Bank of China (PBOC) on Monday to cut its 14-day repo rate by 10 basis points to spur economic recovery, continues to support the Australian dollar (AUD) and the AUD/JPY cross.

Meanwhile, underlying bullish sentiment in global financial markets is seen undermining the Japanese yen (JPY) and is proving to be another factor acting as a tailwind for spot prices. That said, growing acceptance that the Bank of Japan (BoJ) will raise interest rates again by the end of this year, bolstered by data last week showing that Japan’s core inflation rose for a fourth consecutive month, should to help limit JPY losses. Apart from this, lingering geopolitical risk could further limit gains for the AUD/JPY cross.