AUD/JPY: Aussie Rises on Chinese Data; Yen Falls as Economy Contracts in Q3

In the previous Asian trading exchanges, the Australian dollar advanced versus the Japanese yen on returning risk appetite amidst signs that the Chinese economy is improving. Meanwhile, the Samurai declined on expectations that the economy would contract in the third quarter. In today’s Asian trades, gains of the Aussie is expected to continue versus the Samurai on better prospects for the Australian economy, which seem to be in contrast to that of the Japanese economy.

Improvements in the Chinese economy supported by the industrial output and exports data are expected to boost the Australian dollar. China’s industrial output rose by 9.6 percent in October from the previous year, while exports posted the fastest growth in five months also in October. Retail Sales likewise improved, which added to signs that the world’s second largest economy is recovering in the face of many global economic challenges. With the apparent improvement in China’s economy, the Aussie is expected to draw strength. However, the Reserve Bank of Australia move of cutting its growth forecast in 2013 because of weaker mining and the government’s pledge to reach a budget surplus, is expected to curb gains of the Aussie versus the Yen as markets are now speculating a possible rate cut next month.

In Japan, the release of the Preliminary GDP showed that the economy contracted by 0.9 percent in the third quarter, due to weak exports, consumer spending and private capital expenditures. With the data increasing calls for the Bank of Japan to take more action to spur economic growth, the Yen is seen to drop versus its peers. Thus, a long position for the AUD/JPY pair is recommended in today’s Asian trading exchanges.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.