Australian Dollar struggles against Japanese Yen despite hawkish RBA Minutes

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AUD/JPY loses ground after remaining flat in the previous day, trading around 111.40 during the Asian hours on Tuesday.

AUD/JPY falls despite hawkish RBA Minutes showing readiness to raise rates further if financial conditions require it.
China’s manufacturing and non-manufacturing PMIs both rose, beating market expectations to signal steady economic expansion.
Japan’s Finance Minister Katayama warned Tuesday that the government will intervene appropriately to address volatile currency moves as needed.

AUD/JPY loses ground after remaining flat in the previous day, trading around 111.40 during the Asian hours on Tuesday. The currency cross remains subdued as the Australian Dollar (AUD) holds losses following the release of the Reserve Bank of Australia’s (RBA) Meeting Minutes and key Purchasing Managers’ Index (PMI) data from China.

The RBA June monetary policy Meeting Minutes revealed that while the board views current financial conditions as somewhat tight, it remains prepared to implement further rate hikes if necessary to ensure price stability. The central bank highlighted that the ongoing conflict in the Middle East poses a dual threat to the economic outlook, presenting significant upside risks to inflation alongside downside risks to overall growth.

China, Australia’s close trading partner, showed stronger-than-expected resilience in June. The official Manufacturing PMI edged up to 50.3 from the previous 50.0, beating market expectations of 50.1. Simultaneously, the NBS Non-Manufacturing PMI improved to 50.2 from May's 50.1, comfortably defying the consensus forecast of a contractionary 49.9 print and signaling expansion across both sectors.

The downside of the AUD/JPY cross is limited by persistent weakness in the Japanese Yen (JPY), which remains under pressure due to the wide interest rate gap between Japan and other major economies. This ongoing depreciation has kept policymakers concerned and investors on high alert for potential currency intervention by Tokyo. Highlighting this stance, Japan’s Finance Minister Satsuki Katayama stated on Tuesday that the government "will respond appropriately to currency moves at any time as needed."

Economic Indicator

NBS Non-Manufacturing PMI

The NBS Non-manufacturing Purchasing Managers Index (PMI), released by the China Federation of Logistics & Purchasing (CFLP) and China’s National Bureau of Statistics (NBS), is a leading indicator gauging business activity in China’s non-manufacturing sector, namely services and construction.The data is derived from surveys of senior executives at services and construction companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the non-manufacturing economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers and real-estate is generally declining, which is seen as bearish for CNY.

Why it matters to traders?

China Federation of Logistics and Purchasing (CFLP) publishes the non-manufacturing PMI on a monthly basis. The gauge highlights the performance of China’s service sector, which has a significant impact on the global FX market, given the size of the Chinese economy. An expansion in the Chinese service sector activity points to signs of economic improvement and vice-versa.

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