While the Australian Dollar is a commodity correlated, higher risk currency, the Japanese Yen is known as a ‘safe-haven’. A safe-haven currency is one which investors have trust in and tend to turn to in times of economic uncertainty or instability.
Investors believe that safe-haven currencies are stable enough to keep their value when others are performing badly and tend to be currencies belonging to developed economies. Although the Japanese economy has been through trials in recent years, the fact that the Yen is one of the world’s most-traded assets has seen it retain its safe-haven status.In effect, if market conditions deteriorate currencies like the Australian Dollar tend to fall while assets like the Yen climb. This negative correlation can inspire some notable movement in the AUD/JPY exchange rate pairing.
Other factors which have an influence on the AUD/JPY exchange rate include the fluctuations of key commodity prices (iron ore, copper and gold in particular) and economic reports from China.
Over the last ten years the Australian Dollar to Japanese Yen (AUD/JPY) exchange rate has fluctuated between highs of 107.3684 and lows of 56.3311. The peak was achieved in 2007 while the trough was recorded in early 2009. The pairing fell dramatically back in 2008 as the global market crash spooked investors and saw demand for the Yen surge, but over the last few years the ‘Aussie’ has been clawing back ground.
AUD/JPY was able to register gains as the Australian economy appeared to fare better than many of its counterparts in the years following the market meltdown while the Bank of Japan (BoJ) unleashed a wave of stimulus measures in an attempt to dispel its deflationary climate. In the years ahead, Chinese economic slowdown fears, commodity price movements and the adjustment of interest rates in the US are all liable to have an impact on the Australian Dollar to Pound Sterling exchange rate.