AUD/JPY rebounds toward 96.00 near five-month highs

• AUD/JPY has rebounded toward the five-month high at $96.21, which was reached on Wednesday.
• The AUD receives support since the RBA surprisingly decided to maintain cash rates, against an expected 25 basis point cut.
• The Japanese Yen faces challenges as escalating trade tensions prompt the BoJ to hold off on rate hikes this year.

AUD/JPY rises after registering mild losses in the previous session, trading around 95.90 during the European hours on Thursday. The currency cross appreciates as the Australian Dollar (AUD) continues gaining support against its peers after the Reserve Bank of Australia (RBA) surprisingly decided to maintain the Official Cash Rate (OCR) at 3.85% earlier this week, against a highly expected 25 basis point cut.

However, the upside of the AUD/JPY cross could be limited as the AUD could face challenges amid rising expectations of an RBA rate cut in August. Reuters survey poll indicated that all 30 analysts forecasted Australia's central bank to cut the cash rate by 25 basis points to 3.60% in August.

RBA Governor Michele Bullock warned that inflation risks persist as elevated unit labor costs and weak productivity could push inflation above forecasts. Moreover, RBA Deputy Governor Andrew Hauser mentioned that the global economy is facing uncertainty due to tariff effects.

Moreover, the Japanese Yen (JPY) is under pressure as escalating trade tensions heighten risks to Japan's economy, potentially prompting the Bank of Japan (BoJ) to hold off on any interest rate hikes this year. Adding to the pressure, Japan's Producer Price Index (PPI) released earlier this Thursday, hinted that inflation pressures might be cooling off.

Japan's Producer Price Index (PPI) fell 0.2% month-over-month in June, the second straight month of decline, after a downwardly revised 0.1% decline in May. Meanwhile, the annual PPI rose 2.9% in June, slowing from a 3.3% (revised from 3.2%) previous growth. The readings matched market forecasts and were the lowest producer inflation since August 2024.