AUD/JPY holds positive ground above 99.00 as trade talks boost investor sentiment

• AUD/JPY holds gains around 99.35 in Friday's early European session. 
• Optimism surrounding US-China trade talks supports the China-proxy Aussie. 
• Markets have postponed expectations for the next rate hike to December at the earliest.  

The AUD/JPY cross trades on a stronger note near 99.35 during the early European session on Friday. Hope for a US-China trade deal provides some support to the Australian Dollar (AUD) against the Japanese Yen (JPY). Traders will take more cues from the speech from the Reserve Bank of Australia (RBA) Governor Michele Bullock on Monday. 

The Aussie receives some support from easing trade tensions between the United States (US) and China. Both countries are set to begin high-level trade negotiations in Malaysia later on Friday, marking the fifth round of talks. China's Vice-Premier He Lifeng will participate in the meetings, as well as US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer.  

US President Donald Trump and Chinese President Xi Jinping will meet next Thursday on the sidelines of the Asia-Pacific Economic Cooperation summit. The negotiation could range from resumed soybean purchases by Beijing to limits on nuclear weapons. The positive developments surrounding US-China trade talks could lift the China-proxy Aussie, as China is a major trading partner for Australia. 

The JPY weakens against the AUD, even as core inflation in Japan accelerated in September for the first time since May. The report came ahead of the Bank of Japan's (BoJ) policy meeting next week, where the central bank is anticipated to keep the interest rates unchanged. 

Markets have postponed expectations for the next rate hike to December at the earliest, with most expecting it early next year. This, in turn, might cap the upside for the JPY. However, the cautious mood and uncertainty in the financial markets could boost the safe-haven currency like the JPY and create a headwind for the cross.