Australian Dollar holds gains as higher oil prices weigh on Japanese Yen

The Australian Dollar (AUD) has experienced an increase in value for the second consecutive day, trading near 110.40 against the Japanese Yen (JPY). This gain is attributed to rising global oil prices, which are placing pressure on the Japanese Yen (JPY) and increasing import costs for Japan's energy-dependent economy. However, the AUD/JPY pair's upward trajectory might be limited due to potential support from the Bank of Japan (BoJ) tightening monetary policy and the repatriation of foreign assets by domestic investors.

The Australian Dollar (AUD) is also benefiting from expectations of the Reserve Bank of Australia (RBA) raising interest rates later in the month. Analysts at Rabobank note that the RBA has recently issued a hawkish speech, signaling a possible rate hike this month and in November, aligning with US Treasury preferences. In contrast, China's retail sales grew by 0.4% year-over-year (YoY) in August, falling short of expectations, while industrial production rose by 5.2% YoY, surpassing forecasts.

Fixed asset investment remained unchanged in August, matching expectations. Central banks play a crucial role in maintaining price stability by adjusting policy rates to control inflation or deflation. The US Federal Reserve, European Central Bank, and Bank of England aim to keep inflation near 2%, employing interest rate adjustments as their primary tool.

A hike in rates is referred to as monetary tightening, while a cut is known as monetary easing. In the Forex market, the Australian Dollar (AUD) is currently facing pressure below 0.7150, influenced by US bond yields near multi-year highs and oil-driven inflation risks, while the USD/JPY pair is advancing towards 155.00 as traders anticipate upcoming FOMC and BoJ meetings.

Meanwhile, gold prices have slightly declined, hovering around $4,265-$4,264, nearing a one-month low due to anticipation of crucial Federal Reserve policy meetings.