AUD/JPY LOSES MOMENTUM ABOVE THE MID-97.00S AMID BOJ’S HAWKISH COMMENTS

• AUD/JPY trades on a softer note near 97.65 in Thursday’s early European session. 
• A fresh verbal intervention and growing speculation that the BoJ will exit from ultra-loose monetary policy lift the Japanese Yen. 
• Australian Retail Sales rose 1.1% MoM in January, below the expectation of 1.5% MoM.  

The AUD/JPY cross trades in negative territory for the fourth consecutive day during the early European trading hours on Thursday. The downtick of the cross is supported by the verbal intervention and hawkish remarks from Bank of Japan (BoJ) board member Hajime Takata. At press time, AUD/JPY is trading at 97.65, down 0.24% on the day. 

On Thursday, BoJ board member Hajime Takata said that the Japanese central bank needs to consider a flexible approach, including an exit from negative interest rates and bond yield control. Earlier this month, BoJ Deputy Governor Shinichi Uchida stated that the central bank will review other components of its stimulus framework upon ending negative rates. That being said, the hawkish comments from the Japanese authorities provide some support to the Japanese Yen (JPY) and act as a headwind for the AUD/JPY cross.  

Meanwhile, a fresh verbal intervention from Japanese authorities might cap the upside of the cross. Japan's top currency diplomat Masato Kanda stated that the central bank will take appropriate action if currency moves are deemed too volatile. 

On the Aussie front, Australian Retail Sales climbed by 1.1% MoM in January from a 2.7% fall in December, worse than the market expectation of an increase of 1.5%. The Australian Retail Sales figures might convince the Reserve Bank of Australia (RBA) to consider holding interest rates for longer.

Looking ahead, market players will keep an eye on the Australian Judo Bank Manufacturing PMI for February, along with the Japanese Unemployment Rate for January and the Jibun Bank Manufacturing PMI. Traders will take cues from the data and find trading opportunities around the AUD/JPY cross.