Japanese Yen and Australian Dollar News: BoJ and the PBoC in Focus

Japan’s Leading Economic Index Spotlights the BoJ

On Monday, November 25, Japan’s finalized Commercial Board Leading Economic Index (LEI) may influence the USD/JPY pair and sentiment toward the Bank of Japan rate path. According to the preliminary report, the CB Leading Economic Index increased from 106.9 in August to 109.4 in September.

An above-preliminary rise in the LEI could suggest a marked improvement in the macroeconomic environment. The Index considers business and consumer sentiment, key signals for business investment, and household spending. Upward trends in consumer spending may fuel demand-driven inflation.

A higher inflation outlook would support a December BoJ rate hike, potentially dragging the USD/JPY toward 153.5. Conversely, an unexpected fall in the Index may dampen bets on a December hike, driving the pair toward 156.

On Monday, other economic indicators include the CB Coincident Index, which rose from 114.0 in August to 115.7 in September, according to preliminary figures. While the Coincident Index offers insights into current economic conditions, traders will likely focus more heavily on the forward-looking LEI.

Bank of Japan’s December Meeting is Live

On Thursday, BoJ Governor Kazuo Ueda reinforced the uncertainty surrounding the December meeting, reportedly stating,

“It’s impossible to predict the outcome of the meeting at this point. The next meeting is December, but there’s still a month to go. The vast amount of data and information will become available between now and then.”

Since Governor Ueda’s comments, Japan’s inflation rate ex-food and energy rose from 2.1% in September to 2.3% in October, above the BoJ’s 2% target. Additionally, the services sector returned to expansion, supporting arguments for a December rate hike.

Japanese Yen Daily Chart

Shifting the focus to today’s US session, the Chicago Fed National Activity Index and Dallas Fed Manufacturing Index could influence US dollar demand. Economists expect the Indexes to advance in October and November, respectively. Higher-than-expected figures could reduce bets on a December Fed rate cut.

Falling expectations for a December Fed rate cut could support a USD/JPY move toward 156, a pivotal resistance level. In contrast, unexpected declines in the Indexes could raise bets on a December cut, potentially dragging the pair toward 153.5, a crucial support level.

AUD/USD and the People’s Bank of China Policy

Turning toward the AUD/USD, the People’s Bank of China (PBoC) will announce the 1-year Medium Term Lending Facility Rate (MLF). Economists expect the PBoc to maintain the MLF Rate at 2.0%. An unexpected rate cut could drive Aussie dollar demand.

Lower borrowing rates may boost credit demand, potentially fueling domestic consumption. Increased domestic consumption may support Australian exports as China accounts for one-third of them. With an Australian trade-to-GDP ratio of above 50%, improving trade terms may boost the Aussie economy.

Ongoing scrutiny of PBoC policy has intensified amid US tariff threats on Chinese goods, raising the stakes for policy decisions.

Expert Views on US Tariffs and China’s Economy

On Friday, November 22, Asia Society Policy Institute (ASPI) Vice President Wendy Cutler noted that US tariffs are losing effectiveness because Chinese firms are shifting production to Mexico, ASEAN, and other regions.

Australian Dollar Daily Chart

In the US session, the Dallas Fed Manufacturing Index and Chicago Fed National Activity Index will draw interest.

Upward trends could signal a robust US economy, potentially reducing bets on a December Fed rate cut. A less dovish Fed rate path may drag the AUD/USD below $0.65000. The $0.65000 level was a crucial support level earlier in the month.

Conversely, sharp declines in the Indexes could raise expectations for a December rate cut, pushing the pair toward $0.66000, a notable resistance level from early November.

Vigilance Amid Volatile Markets

Traders should closely monitor central bank communications and economic data for actionable insights. Policy shifts continue to drive volatility in USD/JPY and AUD/USD trading, emphasizing the need for vigilance.