AUD/JPY rallies to weekly top, bulls await sustained strength above 97.00 mark

• AUD/JPY catches aggressive bids in reaction to dovish remarks by BoJ’s Uchida.
• A positive risk tone further undermines the safe-haven JPY and lends support.
• The RBA’s hawkish stance and the upbeat Chinese import data act as a tailwind.

The AUD/JPY cross builds on this week's goodish recovery move from the vicinity of the 90.00 psychological mark, or its lowest level since May 2023 and gains positive traction for the second straight day on Wednesday. The strong intraday momentum lifts spot prices to a fresh weekly peak, around the 97.00 round figure during the Asian session and is sponsored by a combination of factors.

The Japanese Yen (JPY) comes under intense selling pressure in reaction to dovish remarks from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, saying that the central bank won't hike rates when markets are unstable. This comes on top of signs of stability in the global financial markets, which is seen as another factor undermining demand for the safe-haven JPY and lending some support to the AUD/JPY cross. 

The Australian Dollar (AUD), on the other hand, continues to draw support from the Reserve Bank of Australia's (RBA) hawkish outlook on Tuesday, indicating that it will keep policy restrictive in the wake of still sticky inflation. Meanwhile, Chinese trade data released this Wednesday showed an unexpected surge in imports, by the 7.2% YoY rate in July, which suggested that domestic demand remains resilient.

Investors, however, remain worried about signs of cooling economic growth in China – the world's second-largest economy. Apart from this, geopolitical risks stemming from the ongoing conflicts in the Middle East should keep a lid on the market optimism. This, in turn, could offer some support to the JPY and cap gains for the AUD/JPY cross, warranting some caution before positioning for any further appreciating move.