AUD/JPY rises to near 113.50 due to renewed hope for US-Iran talks
AUD/JPY remains stronger for the third successive day, trading around 113.40 during the European hours on Wednesday.
  • AUD/JPY rises as improved risk sentiment from potential US–Iran talks supports the Australian Dollar.
  • Trump said he isn’t considering extending the ceasefire, adding he sees no need for it.
  • The Japanese Yen struggles as rising oil prices highlight Japan’s heavy reliance on Middle East energy imports.

AUD/JPY remains stronger for the third successive day, trading around 113.40 during the European hours on Wednesday. The currency cross appreciates as the Australian Dollar (AUD) receives support from positive market sentiment, which could be attributed to the potential second round of United States (US)-Iran talks.

US President Donald Trump said he is not considering extending the ceasefire, adding that he does not see it as necessary. “I think you’re going to be watching an amazing two days ahead. I really do,” Trump said in an ABC News interview on Wednesday. Earlier, He signaled negotiations could resume this week, while also opposing a 20-year suspension of Iran’s nuclear enrichment program.

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser warned on Tuesday during a fireside chat that the months ahead will be challenging for Australia amid the energy crisis driven by Middle East tensions and elevated inflation pressures. Hauser noted that the economy is struggling to absorb the shock due to persistent inflation and supply constraints, increasing the risk of a stagflation-like scenario.

The AUD/JPY cross receives support as the Japanese Yen (JPY) struggles, reflecting Japan’s heavy dependence on Middle East oil imports, on improving oil prices. Oil prices rise amid uncertainty over flows through the Strait of Hormuz after the US military imposed a blockade, tightening supply and casting doubt on further Iran talks.

However, the JPY may receive support from speculation surrounding potential Japanese intervention. Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda said policymakers must remain vigilant to the economic fallout from the Middle East conflict, warning that higher oil prices could weigh on Japan’s growth outlook.

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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QUOTAZIONI IN DIRETTA

Nome / Simbolo
Grafico
% Variazione / Prezzo
GBPUSD
Variazione 1 giorno
+0%
0
EURUSD
Variazione 1 giorno
+0%
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USDJPY
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+0%
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