AUD/JPY Trading
AUD/JPY is a CFD instrument based on the exchange rate between the Australian dollar (AUD) and the Japanese yen (JPY). It is one of the most actively traded cross-currency pairs in the forex market and is widely followed because it combines a commodity-linked currency with one that has historically been viewed as a defensive currency during periods of market uncertainty.
As a leveraged CFD, AUD/JPY allows traders to speculate on rising and falling exchange-rate movements without owning either currency. However, leverage increases both potential profits and potential losses.
When can AUD/JPY volatility increase?
Volatility in AUD/JPY may increase during periods of heightened market activity or when significant economic and political events occur, including:
- Asian trading hours
- The overlap between Asian and European trading sessions
- Reserve Bank of Australia (RBA) interest-rate announcements
- Bank of Japan (BoJ) monetary policy decisions
- Australian employment, inflation and GDP releases
- Japanese CPI, GDP and Tankan Survey releases
- Chinese economic data and commodity market developments
- Major geopolitical developments and shifts in global market sentiment
What affects the AUD/JPY exchange rate?
Reserve Bank of Australia monetary policy
Interest-rate decisions and forward guidance from the Reserve Bank of Australia influence expectations for inflation, borrowing costs and economic growth. Changes in market expectations can affect demand for the Australian dollar.
Bank of Japan monetary policy
The Bank of Japan's monetary policy influences the value of the Japanese yen through decisions on interest rates and other policy measures. Markets closely monitor any changes in policy expectations, as these may affect AUD/JPY.
Commodity prices
Australia is one of the world's largest exporters of commodities, including iron ore, coal and liquefied natural gas (LNG). Changes in global commodity demand and prices can influence the Australian dollar and, consequently, the AUD/JPY exchange rate.
Chinese economic performance
China is Australia's largest trading partner. Economic data from China, particularly relating to industrial production, manufacturing activity and infrastructure investment, can influence demand for Australian exports and affect the Australian dollar.
Economic data
Market participants closely monitor economic indicators from both Australia and Japan, including:
Inflation (CPI)
Gross Domestic Product (GDP)
Employment data
Retail sales
Manufacturing PMI
Trade balance
Unexpected economic data can lead to increased volatility in the AUD/JPY exchange rate.
Market sentiment
The Japanese yen has historically been viewed as a defensive currency during periods of heightened market uncertainty. During periods of stronger investor confidence, commodity-linked currencies such as the Australian dollar have historically benefited from increased risk appetite.
Political and geopolitical developments
Political events, trade policy, geopolitical tensions and international economic developments may influence both currencies and contribute to movements in AUD/JPY.
Interest-rate differentials
Differences between Australian and Japanese interest rates can influence AUD/JPY. Markets often react when investors expect one central bank to tighten or loosen monetary policy more quickly than the other, although exchange rates are influenced by a wide range of factors.
About the Australian and Japanese economies
Australia has a developed, export-oriented economy with significant natural resources. Commodity exports, particularly iron ore, coal and LNG, play an important role in economic growth.
Japan is one of the world's largest economies, with strengths in manufacturing, technology, automotive production and industrial exports. The Japanese economy is also influenced by domestic consumption, international trade and monetary policy.
Because AUD/JPY reflects two economies with different economic structures and monetary-policy approaches, the currency pair is closely watched by forex traders around the world.