AUD/JPY to edge higher to 83 as the aussie gets a shot in the arm – Westpac

AUD/JPY’s August lows around 78 told us a lot more about the aussie than the yen. It was the culmination of a two month AUD underperformance after the hawkish June FOMC meeting. Looking ahead, economists at Westpac expect the AUD/JPY pair to grind higher towards 83 as the Australian vaccination campaign ramps up.  

Japan is struggling with an upswing in COVID-19 cases

“Recovery in Q4 relies on state premiers loosening restrictions substantially once vaccination rates hit benchmarks. Our base case is for a sharp rebound late in Q4 into Q1, supporting A$ crosses.”

“Whatever the pace of RBA QE tapering, it projects a 0.1% cash rate until 2024. The BoJ has pulled back its QE pace without fanfare but its 0.0% 10 year JGB target will ensure A$’s modest yield pickup versus JPY doesn’t shrink much further. Japan is also struggling with an upswing in COVID-19 cases.” 

“If vaccinations help Australia partially reopen in Q4 then AUD/JPY should chop up to 83.”