The AUD/JPY currency pair is often used in carry trades. Traders buy the Australian Dollar / Japanese Yen pair because of the interest rate spreads that tend to be quite high. The pair usually declines when there is a prevalent risk-off sentiment among investors.
The Australian dollar is the currency of Australia and its external territories, as well as of several independent Pacific Island states. It is used as legal tender in Australia. AUD depends heavily on the price of commodities of which Australia is a major exporter, namely iron ore, coal, natural and petroleum gas, gold, and aluminium oxide. Changes in the prices of those commodities will affect the Australian dollar.
The Japanese yen is the currency of Japan and the third most traded currency in the world which is also widely used as a reserve currency around the world. The Japanese economy is one of the largest with Japan being one of the largest exporters in the world. However, it has recently encountered problems resulting from its low fertility rates. Japan has a rapidly aging population and fewer young workers to support the economy. Another issue is deflation which threatens to make the yen so strong that it renders the Japanese exports less competitive.
Factors affecting the AUD/JPY rate include general economic indicators, such as information on employment, inflation data, retail sales, industrial production, trade balance and the release of GDP data, as well as the central bank decisions regarding the interest rates in both countries. Political events, natural disasters and various government policies can impact the AUD/JPY exchange rate significantly.
Risk warning: Trading in FX and CFDs entails high risk of losing capital.
