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  • AUD/JPY jumps 20 pips as RBA’s Lowe cheers central bank’s fiscal package. 
  • Jobless rate likely to rise less-than-expected, said Lowe. 
  • Us-China tussle may cap gains in the AUD/JPY pair. 

The bid tone around the Aussie dollar strengthened, pushing the AUD/JPY higher to 71.50 from 71.30 after the Reserve Bank of Australia’s governor said the central bank’s stimulus package delivered in March is yielding desired results, 

“The evidence so far is that our March package is working as expected,” governor Lowe said while adding that the central bank intends to keep the expansionary monetary policy until credible evidence of jobs growth emerges. 

Lowe added that the decline in jobs could now be 15% as opposed to 20% initially feared and the recovery depends on how fast the confidence is restored. The comments on jobless rate may have powered the 20-pip rise in the currency pair. 

The RBA, in March, launched a bond purchase program to keep the three-year yield near 0.25% alongside a cut in interest rates to a record low of 0.25%. More recently, the central bank has winded down its asset purchases amid signs of stability in the three-year yield near the target rate. The RBA, therefore, has been relatively less dovish as compared to the US Federal Reserve, which is expanding its balance sheet at a frantic pace. 

Looking forward, while Lowe’s comment lifted the pair, the gains will likely be erased if the forward-looking Aussie capital expenditure number, scheduled for release at 01:30 GM, disappoints expectations. The escalating US-China tensions could also keep a lid on gains in the growth-linked Aussie dollar. The pair has already retreated back to 71.42 at press time. 

Technical levels