• AUD/JPY slips despite the Reserve Bank of Australia raising the Official Cash Rate to 4.10% from 3.85% in March.
• The Middle East war is pushing energy prices higher, adding to inflationary pressures in Australia.
• The Japanese Yen may find support on expectations of potential intervention by Japanese authorities.

AUD/JPY pares its daily gains, trading around 112.50 during the Asian hours on Tuesday. The currency cross loses ground as the Australian Dollar (AUD) struggles following the release of the Reserve Bank of Australia (RBA) policy decision.

However, the RBA decided to raise the Official Cash Rate (OCR) to 4.10% at its March policy meeting, from 3.85%, potentially becoming the first G10 central bank to resume tightening. Market participants will closely watch RBA Governor Michele Bullock’s press conference for signals on the future policy path.

The ongoing Middle East conflict is driving energy prices higher, fueling inflationary pressures in Australia. With the economy remaining resilient, the Reserve Bank of Australia has room to respond by raising the OCR, aiming to contain inflation risks without significantly disrupting domestic growth momentum.

However, the upside of the AUD/JPY cross may be restrained as the Japanese Yen (JPY) may gain support amid potential intervention by Japanese authorities. Japan’s Finance Minister Satsuki Katayama said on Tuesday that financial markets are seeing heightened volatility, adding that authorities stand ready to act if necessary, including in the foreign exchange market.

Meanwhile, Bank of Japan (BoJ) Governor Kazuo Ueda said underlying inflation is gradually moving toward the bank’s 2% target, adding that policy will be guided appropriately to achieve stable and sustainable inflation. However, the BoJ is widely expected to keep interest rates unchanged at 0.75% on Thursday while retaining the option for further tightening.