Australian Dollar softens against Japanese Yen as RBA lifts rate to 4.85% in fifth hike this year

AUD/JPY weakens to near 110.20 in Tuesday’s Asian session.
RBA raises interest rate by 25 bps to 4.85% at its November policy meeting on Tuesday.
Traders remain on high alert for currency intervention from Japanese authorities.

The AUD/JPY cross edges lower to around 110.20 during the Asian trading hours on Tuesday. The Australian Dollar (AUD) attracts some sellers against the Japanese Yen (JPY) following the Reserve Bank of Australia (RBA) interest rate decision.

As widely expected, the RBA decided to raise its Official Cash Rate (OCR) by 25 basis points (bps) to 4.85% from 4.60% after concluding its November monetary policy meeting. This is the RBA's fifth interest rate hike of 2026, its highest level in 18 years.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Six members of the Monetary Policy Board voted for the rate hike, while three preferred to keep the OCR unchanged at 4.60%. According to the statement, the board said inflation remains elevated and broadly based and that there is an increasing risk that higher inflation expectations will become embedded.

Traders will take more cues from the RBA Governor Michele Bullock’s press conference at 04:30 GMT. Any hawkish comments from Bullock could lift the Aussie against the JPY in the near term.

An intervention warning from Japanese authorities might cap the upside for the cross. Japan’s Finance Minister Satsuki Katayama said on Monday that it’s crucial to maintain stable foreign exchange markets and the government needs to avoid chaotic fluctuations.

Last week, Katayama also said that the government stood ready to take decisive action in the currency market, indicating that ‌Tokyo has not lowered its guard against persistent weakness in the JPY.

The Bank of Japan (BoJ) left the short-term interest rate unchanged at 1.25% at its latest policy meeting last week. The decision aligned with market expectations.

RBA seen hiking again as inflation surprise boosts Aussie yield appeal

Strategists at Brown Brothers Harriman highlight that the upcoming "RBA policy decision and Statement on Monetary Policy" on Tuesday is expected to deliver a "second straight 25bps hike to 4.85% because inflation is materially worse than the bank assessed in August." They note that "cash rate futures imply 83% probability of a hike," and add that "hawkish guidance would widen AUD’s yield advantage," reinforcing support for the Australian Dollar as the RBA’s stance diverges from its peers.

Technical Analysis: AUD/JPY keeps a bearish vibe below the 100-day SMA

In the daily chart, AUD/JPY retains a bearish near-term bias as spot holds below the Bollinger middle band and the 100-day simple moving average (SMA). The pair is also capped by the Bollinger upper band, reinforcing the downside tone, while the Relative Strength Index (14) around 45 suggests subdued momentum rather than oversold conditions, leaving room for further weakness.

On the topside, initial resistance is located at the Bollinger middle band at 110.45, followed by the Bollinger upper band near 111.40, with the 100-day SMA at 111.90 acting as a deeper hurdle for any recovery attempts. On the downside, the next significant support emerges at the Bollinger lower band around 109.50, where sellers could pause, but a sustained break beneath this floor would likely open the way toward lower levels on the daily horizon.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

RBA FAQs

What is the Reserve Bank of Australia and how does it influence the Australian Dollar?

The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

How does inflation data impact the value of the Australian Dollar?

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

How does economic data influence the value of the Australian Dollar?

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

What is Quantitative Easing (QE) and how does it affect the Australian Dollar?

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

What is Quantitative tightening (QT) and how does it affect the Australian Dollar?

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.