- AUD/JPY climbs as Australian Dollar gains support from robust domestic inflation data and mixed Chinese PMI results.
- Australian Treasurer Jim Chalmers noted that, despite the rise in inflation, market expectations for additional interest rate cuts remain unchanged.
- The Japanese Yen weakens following disappointing industrial production and retail sales figures from Japan.
AUD/JPY Extends Gains, Trades Near 91.30 in Asian Session
The AUD/JPY currency pair continued its upward momentum on Wednesday, trading close to 91.30 during Asian hours. The pair has been on a steady climb for three consecutive sessions, driven by a stronger Australian Dollar following upbeat inflation data, while mixed economic signals from China and Japan also played a role in shaping sentiment.
Australian Inflation Surprises to the Upside
Australia’s inflation figures for the first quarter of 2025 came in stronger than expected. The Consumer Price Index (CPI) rose 0.9% quarter-over-quarter, a notable jump from the 0.2% increase in Q4 2024 and surpassing the projected 0.8% rise, according to data from the Australian Bureau of Statistics (ABS). On a yearly basis, inflation accelerated to 2.4%, outpacing the 2.2% forecast.
In March, the annual CPI held steady at 2.4%, while the Reserve Bank of Australia’s preferred measure, the Trimmed Mean CPI, climbed 2.9% year-over-year.
Despite the higher inflation print, Australian Treasurer Jim Chalmers indicated that financial markets remain confident in the outlook for further rate reductions. He remarked that the latest inflation data does not present a major shift in expectations for monetary policy.
China’s PMI Data Sparks Concerns Over Economic Momentum
China’s latest economic readings have added to worries about a slowdown. According to the National Bureau of Statistics, the Manufacturing Purchasing Managers’ Index (PMI) dropped to 49.0 in April, down from 50.5 in March and falling short of the 49.9 estimate. This decline points to a renewed contraction in the manufacturing sector.
Meanwhile, the Non-Manufacturing PMI also edged lower, dipping to 50.4 from the previous 50.8, missing the expected reading of 50.7. These figures suggest uneven growth and lingering uncertainty in the world’s second-largest economy.
Japanese Yen Pressured by Weak Economic Indicators
The Japanese Yen continued to weaken amid disappointing domestic data. Japan’s industrial production declined 1.1% month-over-month in March, following a 2.3% gain in February and worse than the expected 0.4% decrease. This marked the second contraction in 2025 and added to concerns over Japan’s industrial sector, particularly in light of potential U.S. tariffs.
Retail sales figures provided a mixed picture. Although retail sales grew 3.1% year-over-year in March, the result fell short of the 3.5% forecast. Still, the data marked 36 consecutive months of expansion, bolstered by higher wages, though the slowdown hints at increasing economic pressures.
