AUD/JPY moves above 96.00 after paring losses, possibly driven by improved risk sentiment

• AUD/JPY recovers its daily losses, possibly driven by a risk-on mood amid the expected Federal Reserve interest rate cut.
• The Japanese Yen receives support from the hawkish sentiment surrounding the BoJ’s policy outlook.
• The Australian Dollar may appreciate due to the Reserve Bank of Australia’s aggressive monetary policy approach.

AUD/JPY trims its intraday losses, trading around 96.10 during the European hours on Wednesday. However, the AUD/JPY cross may hold losses as the Japanese Yen (JPY) receives support from the hawkish sentiment surrounding the Bank of Japan’s (BoJ) policy outlook.

Traders await the US Federal Reserve’s (Fed) interest rate decision scheduled to be released later in the North American session. The focus will shift toward the BoJ policy decision on Friday, with expectations of keeping rates unchanged while leaving the possibility open for further rate hikes.

Japanese Finance Minister Shunichi Suzuki stated on Tuesday that rapid foreign exchange (FX) fluctuations are undesirable. Suzuki emphasized that officials will closely monitor how FX movements affect the Japanese economy and people's livelihoods. The government will continue to assess the impact of a stronger Japanese Yen and respond accordingly, according to Reuters.

The downside of the AUD/JPY cross could be restrained as the Australian Dollar (AUD) receives support from the Reserve Bank of Australia's (RBA) hawkish stance on monetary policy outlook. RBA Governor Michele Bullock stated that it is premature to consider rate cuts due to persistently high inflation. Additionally, RBA Assistant Governor Sarah Hunter noted that while the labor market remains tight, wage growth appears to have peaked and is expected to slow further.

Investors are now awaiting Australia's jobs data, including Employment Change and the Unemployment Rate for August, set to be released on Thursday. This report may provide insights into the health of the labor market and may influence expectations regarding the future direction of domestic monetary policy.