Not likely. Since March, the Japanese Yen (JPY) moved higher, but the Australian dollar (AUD) plunged. The result short-term, has been a AUD JPY exchange rate that dropped to 10-year lows. With investors worried about US and China trade wars, most of the investment is flowing to the Japanese Yen. This is because the Japanese Yen is considered a "safe" investment, while the Australian Dollar is considered a relatively "high risk" asset.
Bank experts find this interplay between the Australian dollar and Japanese Yen interesting, because it shows how worried or happy investors are about the state of the global economy. For the rest of the year, banks predict the AUDJPY to drop from current levels - i.e. investors will be more worried.
Check today's AUDJPY Forex Rate: Currency Converter and Graph
Bank AUDJPY Exchange Rate Forecasts
So what are the major banks predicting in 2019 amongst all the political uncertainty from Brexit?
- ANZ - AUD/JPY forecast will be 70 by the end of the year
- NAB - More pessimistic, with the AUD/JPY forecast exchange rate about 68 by December
- Westpac - Predict the AUDJPY rate to be 71 by the end of 2019
Is the AUDUSD and USDJPY rising?
Yes and no. The Japanese Yen exchange rate is rising against the US Dollar, but the Aussie dollar has been falling relative to the US dollar. There are many factors that influence the AUDJPY relationship, but here are some of main ones:
- Australian dollar currency (USD): When the AUD falls, the JPY goes up. This is because the AUDJPY is a currency pair. The Australian dollar has been falling against the JPY since the beginning of the year.
- Japanese economy: Japan's economy grew 1.3% in April to June, according to growth data. When the domestic economy is growing, the value of the Japanese Yen improves and the JPY exchange rate strengthens against the US dollar.
- Weak Chinese economy: Around 20% of Japan's exports go directly to China. When China's economy falters, they reduce imports from Japan, leading to a lower Japanese Yen. Unfortunately, China only grew 6.2% in the April-June quarter of 2019, almost a 30-year low.
- US-China trade war: US President Donald Trump is talking about increasing tariffs on US$250 billion of Chinese imports from 25% to 30% by the beginning of October. This is a key reason why China's growth is slowing and importing less from Japan.
- Safe-haven buying: When investors are worried about global economic growth they tend to buy 'safer' assets like the Japanese Yen.
Major Foreign Exchange Rates
The AUD and JPY aren't the only currencies that are falling. Major currencies like the Euro (EUR), Great British Pound Sterling (GBP) and New Zealand Dollar (NZD) are also being influenced by a rising US dollar and weak local conditions.
For Australian dollar cross rates (AUD/USD, AUD/EUR, AUD/GBP, AUD/NZD) this means it'll be extra difficult for banks to forecast which direction currencies will go in the future.
Here is a summary of what banks are currently forecasting:
AUDEUR - Has the AUDEUR peaked already?
What is the AUDJPY?
The Australian Dollar (AUD) against the Japanese Yen (JPY) is an exciting pair for its relationship with risk. The AUDJPY will rise on 'carry flows' in a low-risk context, but when investors are worried the AUDJPY will fall. The Japanese Yen is the third most heavily traded currencies in the world, behind the US dollar and the Euro.
The Japanese Yen is considered a "safe" investment, while the Australian Dollar is considered a "risky" asset. So when there is a lot of economic or political uncertainty, investors will buy 'safe haven' currencies and sell higher risk currencies. Other 'safe-haven' currencies include Swiss Francs (CHF) and the US Dollar (USD).
How do I forecast the AUDJPY exchange rate?
Investors forecast the movement of the Australian dollar as it relates to the Japanese Yen, by looking at key influences including:
- Australian dollar, Japanese Yen and US dollar forecasts
- Central banks - namely the Bank of Japan (BoJ), Reserve Bank of Australia (RBA), the US Federal Reserve (the Fed), European Central Bank (ECB)
- Interest rates - linked with central banks that control interest rates and monetary policy. Investors predict how central bank announcements - like interest rate cuts or hikes - will affect interest rate spreads and the relative value of currencies
- Local governments - Australian Government and Prime Minister Scott Morrisson, Japan's Government and Prime Minister Shinzō Abe, US Government and President Trump, UK's Brexit and Prime Minister Boris Johnson
- Japanese Economic Data - Economic growth indicators (GDP), Inflation (CPI Core Price Index, PPI Production Price Index), Trade balance (balance between exports and imports of total goods and services) and the Japanese stock exchange (e.g. Nikkei)
- Australian Economic Data - GDP, trade balance and inflation and the Australian stock exchange (i.e. ASX)
- US Economic Data - GDP, trade balance and inflation and the US stock exchange (e.g. NYSE, Nasdaq)
- China (plus Hong Kong, Singapore, and rest of Asia) Economic Data - GDP, trade balance and inflation and China's stock exchange (e.g. Shanghai, Shenzhen, Stock Exchange of Hong Kong)
- Refined Product Price Forecasts - Japan's biggest exports are finished products like cars, computers, medical machinery and steel
- JPY technical analysis - Many investors look at the JPY exchange rate and predict which direction it will go by looking at charts
Does the AUDJPY exchange rate change a lot?
Currency crosses like the AUDJPY can be volatile when there is economic uncertainty. AUDJPY forecasts can also change quickly. That’s why it’s popular with traders and why it’s important to consider hedging if you're transferring money overseas. Many companies offer rate alerts online to help you get the best AUDJPY exchange rate.
Why should I trust the 'Big 4' bank AUDJPY forecasts?
The Australian Dollar and Japanese Yen exchange rates can change. A lot. This is because multiple factors influence currency movements that are both local and global. Plus, bank forecasts are generated with a combination of computer modelling and human influence. So while banks have experts that spend long hours modelling future currency moves with financial instruments, there may be factors that can't be predicted. We think it's better to look at exchange rate forecasts as a guide. We also recommend you don't make your financial decisions based solely on bank forecasts, but rather, take into account your personal objectives, financial situation and needs.