AUD/JPY: China Easing Speculations Aid the Aussie; Weak Economic Figures Weigh on the Yen

In the previous Asian trading exchanges, the Australian dollar won versus the Japanese yen on speculations that the Chinese government would do more to trigger faster economic growth and boost equities, thereby resulting to a rally in commodities. Meanwhile, the Samurai continued to suffer due to the strained relations between China and Japan. With renewed hopes that the China, Australia’s single largest export market, would exert more effort to stimulate the economy, the Aussie is likely to be extended support against the Samurai in today’s Asian trading exchanges.

Markets seemed to have reacted positively over news that the People’s Bank of China injected its biggest weekly cash into money markets. The central bank injected a net of 365 Billion Yuan this week as demand for cash increases before a week-long holiday. The Aussie is also expected to get a boost from positive news in Spain after the government unveiled new budget reforms which are deemed to be initial steps before requesting for a sovereign bailout. Madrid is said to be engaging in talks with the European Union authorities about the terms of a potential package that would activate the new bond-purchasing program of the European Central Bank.

For the Samurai, bearish trades are anticipated as Japan’s Preliminary Industrial Production report showed a decline in August, more than the economic projections. Industrial output fell by 1.3 percent, after dropping by 1 percent in July, adding to signs that the Japanese economy is at risk of contracting in the third quarter due to weak exports and the worsening islands-dispute with China. Also, consumer prices dropped by 0.3 percent in the previous month, adding pressure to the Bank of Japan to further ease monetary policy. Considering the foregoing factors, a long position for the AUD/JPY is recommended in today’s Asian trades.

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