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  • Fed emergency cut sees markets into risk-off mode, weighs on AUD/JPY.
  • AUD/JPY stabilises ahead of BoJ emergency meeting. 

AUD/JPY is trading at 65.86 having traded between a 64.85 and 67.35 range as markets start off as they left off last week, in turbulence following central bank intervention.

The Reserve Bank of New Zealand kicked off proceedings with a surprise 25basis point cut which was then followed by the Federal Reserve slashing rates to zero, announcing QE and then the Reserve Bank of Australia adding A$5.9B to the banking system through market repo operations.

All in all, that is a fair amount of precautionary action from the central banks, but to top of all off, there was a coordinated move in the FX swap market between central banks to assure up dollar funding. That could be taken either way by markets this week, either as a warning sign or that there is going to be enough proactive and preventive work from the authorities to prevent a financial crisis in the banking system.

 The Washington Post said the Fed vowed on Sunday to “use its full range of tools” to support the economy and the “smooth functioning of markets.”

“In the coming months, the Fed will purchase at least $700 billion more in bonds as part of its new quantitative easing. The majority of that, at least $500 billion, will be US Treasury bonds” the article read which kicked off the storm as first on the scene to report the news. 

BoJ to hold an emergency meeting

AUD/JPY will continue to trade as a barometer for risk and is likely to find supply on rallies while the coronavirus. the fate of the yen is going to be partly down to the Ministry of Finance and the Bank of Japan. The BoJ will hold an emergency meeting today at 0.300 GMT. 

AUD/JPY levels

 

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