AUD/JPY climbs toward 98.50 as the Australian Dollar rebounds on foreign inflows

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AUD/JPY recovers daily losses amid foreign inflows, driven by rising RBA rate cut bets.
The S&P/ASX 200 gains 0.86% to trade above 9,050, with gains in financial, real estate, and Gold stocks.
BoJ board member Naoki Tamura said that the central bank should move interest rates closer to neutral levels.

AUD/JPY trades around 98.40 during the European hours on Thursday, after recovering its daily losses. The pair strengthens as the Australian Dollar (AUD) rebounds on prospects of foreign inflows, with gains in financial, real estate, and Gold stocks. The S&P/ASX 200 rises 0.86% to trade above 9,050 after weaker jobs data quickly boosted the chance of a November cut in the 3.65% cash rate to 76%, from under 50% prior.

The Australian Bureau of Statistics (ABS) reported on Thursday that the Employment Change came in at 14.9K in September, against the market expectations of 17K. The previous reading was -11.8K (revised from -5.4K). Meanwhile, the Unemployment Rate rose to 4.5%, jumping to a near four-year high. The figure came in above the market consensus and the previous 4.3%.

RBA Assistant Governor (Financial Markets) Christopher Kent spoke at the CFA Society Australia Investment Conference 2025 late Wednesday that financial conditions are less restrictive after recent rate cuts. Kent also added that the cash rate is now within a wide, uncertain neutral range, with the central bank reassessing its outlook with incoming data and risks.

The AUD/JPY cross may face challenges as the Japanese Yen (JPY) receives support against its peers, following the hawkish remarks from the Bank of Japan (BoJ) board member Naoki Tamura, who said on Thursday that the central bank should push the interest rates closer toward levels deemed neutral. However, Tamura declined to comment when asked whether to propose a rate hike at the October meeting.

Interest rates FAQs

What are interest rates?

Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

How do interest rates impact currencies?

Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

How do interest rates influence the price of Gold?

Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

What is the Fed Funds rate?

The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.