AUD\/JPY rose to about 114.15 in early European trading on Monday. Reports that Iran sent the US a proposal to reopen the Strait of Hormuz and end the war lifted risk mood and supported the Australian Dollar.<\/p>\n
The proposal called for extending the ceasefire so both countries could work towards a permanent end to the war. The White House received it via Pakistani mediators, and the US response was unclear.<\/p>\n
Traders are awaiting Australia\u2019s March Consumer Price Index on Wednesday. CPI is forecast at 4.7% year on year in March, up from 3.7% in February, and this may affect expectations of a 25 basis point rate move at the Reserve Bank of Australia meeting on May 5.<\/p>\n
The Bank of Japan is widely expected to keep its interest rate at 0.75% later this week. The central bank is reported to be assessing inflation pressure from higher energy costs, after Japan\u2019s government said consumer inflation accelerated in March for the first time in five months.<\/p>\n
Background notes said the yen is influenced by Japan\u2019s economic performance, Bank of Japan policy, bond yield gaps, and risk sentiment. They also referenced the BoJ\u2019s ultra-loose policy from 2013 to 2024, followed by gradual unwinding from 2024.<\/p>\n
The proposal from Iran to reopen the Strait of Hormuz is reducing immediate geopolitical risk. This has pushed the CBOE Volatility Index (VIX) down to 13.5, its lowest point this quarter, improving overall market sentiment. This environment favors risk-on currencies like the Australian Dollar over the safe-haven Japanese Yen.<\/p>\n
We are watching this week’s Australian CPI report very closely, with forecasts for a significant jump to 4.7%. The recent Q1 Producer Price Index already showed a 1.5% surge, suggesting consumer inflation is likely to be strong. Markets are now pricing in a 75% probability of a rate hike from the Reserve Bank of Australia at its May 5 meeting.<\/p>\n
In contrast, the Bank of Japan is widely expected to keep its policy rate steady at 0.75% this week. Governor Ueda recently noted that while wage growth is present, it has not yet translated into the durable demand-driven inflation the bank needs to see before acting again. This reinforces the view that the BoJ will remain cautious and lag other central banks in tightening policy.<\/p>\n
Given this outlook, we see potential in positioning for further AUD\/JPY strength through call options. An upside break of the 115.00 level looks increasingly likely if Australian inflation data comes in hot this Wednesday. This move would continue the trend we saw throughout 2025 when the pair rallied sharply on the widening RBA-BoJ policy gap.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD\/JPY climbed to 114.15 as Iran\u2019s Strait of Hormuz proposal boosted risk sentiment; traders await Australian CPI.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-45935","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45935","targetHints":{"allow":["GET","POST","PUT","PATCH","DELETE"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=45935"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/45935\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=45935"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=45935"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=45935"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}