- AUD/JPY depreciates as risk aversion increases after fresh Israeli strikes hit Tehran.
- Japan’s CPI rose 1.3% YoY in February, the lowest since March 2022, below the 2% target.
- Australia’s S&P Global Flash Composite PMI fell to 47.0 in March from 52.4 in February.
AUD/JPY extends its losses for the second successive day, trading around 110.60 during the Asian hours on Tuesday. The currency cross weakens amid heightened risk aversion following a fresh wave of Israeli strikes on Tehran.
Israel launched its latest attack on Iran despite US President Donald Trump signaling a pause in strikes on energy infrastructure after what he described as productive talks with Tehran. The Israeli Defense Forces (IDF) said operations would continue in line with government directives until further notice.
However, Iran’s Foreign Minister Abbas Araghchi denied any engagement with Washington. Iranian Parliament Speaker Mohammad Bagher Ghalibaf also said on Monday that no negotiations had taken place with the US. Meanwhile, senior military adviser Mohsen Rezaei stated that the conflict would persist until Iran receives full compensation for the damage incurred.
The downside in the AUD/JPY cross may be limited as the Japanese Yen (JPY) remains under pressure following softer inflation data in Japan. The Statistics Bureau of Japan reported that the National Consumer Price Index (CPI) rose 1.3% YoY in February, down from 1.5% previously. This marks the lowest level since March 2022 and falls short of the central bank’s 2% target.
Core inflation, measured by CPI excluding fresh food, eased to 1.6% YoY from 2.0%, coming in below the 1.7% consensus. Meanwhile, “core-core” inflation, which excludes both fresh food and energy, edged down to 2.5% YoY from 2.6%.
In Australia, the S&P Global Flash Composite Purchasing Managers’ Index (PMI) dropped to 47.0 in March from 52.4 in February, signaling a return to contraction after eighteen months as demand conditions weakened. The Services PMI fell to 46.6 from 52.8, marking its first contraction in over two years. Meanwhile, the Manufacturing PMI edged down to 50.1 from 51.0, indicating near stabilization in the sector.
Market focus now shifts to Wednesday’s inflation report, where trimmed mean CPI is expected to hold steady at 3.4% and headline inflation at 3.8%.
