BoJ rate decision: Australian Dollar remains lower against Japanese Yen

• Following the BoJ policy decision, continued Japanese Yen strength keeps AUD/JPY in negative territory.
• 1.25% remains the BoJ's policy rate after an unchanged decision, in line with expectations.
• 80% was the probability of an RBA rate hike to 4.85% implied by ASX futures as of 29 October.

AUD/JPY trades near 110.80. The cross is declining for a second consecutive day during Friday's Asian session, with the Japanese Yen (JPY) retaining its strength following the Bank of Japan (BoJ) decision. At the end of their two-day monetary policy review, BoJ board members opted to hold the short-term interest rate at 1.25%.

Expectations of additional Reserve Bank of Australia (RBA) tightening are supporting the Australian Dollar (AUD), potentially limiting further AUD/JPY declines. Markets have increasingly priced in a rate rise at the central bank's forthcoming 3 November meeting following above-forecast inflation and hawkish remarks from RBA officials.

An 80% probability of a rate increase to 4.85% at the next RBA Board meeting was implied by futures pricing as of 29 October. The ASX 30-day interbank cash rate futures November 2026 contract stood at 95.22.

One final RBA hike expected as TD Securities highlights stronger inflation

Stronger third-quarter CPI has bolstered expectations of another RBA move next week, according to TD Securities. The bank now expects the central bank to "lift the cash rate 25bps at next week's meeting to 4.85%," saying the firmer inflation reading "validates the Bank's decision to hike last month". It also argues that "likely forecast upgrades to the Bank's inflation track in the November Statement on Monetary Policy likely justify a follow-up 25bps hike next week." With the tightening phase apparently approaching its conclusion, TD Securities says this "hike should mark the last in the cycle,".