A research note by Westpac's senior currency strategist, Sean Callow
He says that since the fall in February, the pair has seen more two-way price action and believes that there is still scope for gyrations in the pair in the short-term.
Adding that the US decisions on wide-ranging tariffs on Chinese imports, expiration of steel and aluminium tariff exemptions, and the Trump-Kim summit to come among the reasons why the pair may be exposed to risk-sensitive movement.
However, he says that over time the pair should settle in a tight range near current price levels.
"Our baseline scenario multi-month is for the US dollar to gain against both AUD and JPY, as Fed tightening ensures yield spreads continue move in the greenback's favour. This would leave AUD/JPY around 82-83", Callow argues.
He notes that Australia's domestic backdrop remains broadly supportive with the RBA upbeat on growth and Q1 GDP shaping up fairly well. That compares to the BOJ who will be on hold as core inflation remains "stubbornly low". He foresees only a return to risk aversion being the factor that could drive AUD/JPY towards 81.
Well, quite frankly I don't see much difference between the RBA and the BOJ at this point. The RBA themselves are going to stay on hold for the foreseeable future and with housing market woes being added to consumption and inflation worries, the RBA pretty much has their hands full too.
