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AUD/JPY recovers from session lows after RBA rate cut

  • AUD/JPY regains poise as RBA cuts rates as expected. 
  • The central bank left the doors open for further easing, if required. 

The bid tone around the Aussie dollar strengthened, helping the AUD/JPY cross bounce up from session lows after the Reserve Bank of Australia (RBA) cut rates by 25 basis points, to a new record low of 0.5%. 

The central bank was expected to deliver rate cut in response to the escalation in the coronavirus outbreak and extraordinary volatility in markets seen last week. Also, money markets had priced in the 25 basis point cut. 

As a result, the AUD/JPY cross picked up a bid near 780.30 after the RBA rate decision and quickly rose to levels above 70.80. 

The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors and the uncertainty is also likely to affect domestic spending, the RBA said, while leaving the doors open for another rate cut if required. 

Key quotes

Coronavirus is anticipated to delay progress towards employment and inflation targets.

Wages are not expected to pick up for some time.

Once the virus is contained, the economy is seen to be on an improving trend.

All in all, the central bank delivered what was expected. So, the AUD/JPY could continue to rise and may find acceptance above 71.00 if the global equity markets put on a good show. At press time, the futures on the S&P 500, the benchmark for global equities, are reporting a 0.51% gain. The index rose by over 4.5% on Monday on hopes for coordinated easing by the major central banks. Meanwhile, the AUD/JPY pair is trading near 70.80.

Technical levels

 

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