AUD/JPY rises above 101.00 due to growing doubts over future BoJ rate hikes

• AUD/JPY gains ground as Yen buyers adopt caution due to political instability in Japan.
• Japan's Producer Price Index increased by 3.4% YoY in October and rose by 0.2% MoM.
• Australian PM Anthony Albanese shared about trade discussions with US President-elect Donald Trump during a phone call last week.

AUD/JPY extends its gains for the third successive day, trading around 101.20 during European hours on Wednesday. The rise in the AUD/JPY pair is largely due to the weakened Japanese Yen (JPY), fueled by growing doubts over future rate hikes by the Bank of Japan (BoJ). Japan's fragile minority government is expected to complicate any plans for tightening monetary policy.

On the data front, the BoJ's preliminary report on Wednesday showed that Japan's Producer Price Index (PPI) increased by 3.4% year-over-year in October, exceeding expected 3.0% and previous 3.1% readings. Meanwhile, the PPI rose by 0.2% month-over-month, surpassing the expected flat growth for the month.

Meanwhile, the BoJ's Summary of Opinions from its October meeting highlighted division among policymakers regarding additional rate hikes. Nevertheless, the central bank maintained its outlook, suggesting it could raise its benchmark rate to 1% by the second half of fiscal 2025, amounting to a total policy tightening of 75 basis points from the current rate.

The Australian Dollar (AUD) gained support after a radio interview with Australia's Prime Minister (PM), Anthony Albanese. Albanese said that he discussed trade relations with US President-elect Donald Trump during a phone call last week. He informed Trump that the US has a trade surplus with Australia and stressed that it's in Washington's best interest to maintain "fair trade" with its ally.

On Wednesday, Australia's Wage Price Index showed a 3.5% year-over-year rise in the third quarter, down from the 4.1% growth seen in the previous quarter and slightly below the anticipated 3.6% increase. This represents the slowest wage growth since Q4 2022. Meanwhile, the quarterly index remained steady at 0.8% in Q3, just under the expected 0.9%.