AUD/JPY clocks six-week high as RBA minutes downplay need for negative rates

• AUD/JPY added 10 pips after RBA minutes downplayed the need for additional stimulus. 
• Policymakers, however, remain committed to keeping policy easy for a prolonged period of time. 
• RBA may boost bond purchases in the short-term as the 3-year yield has drifted above the target.

AUD/JPY jumped 10 pips to hit a six-week high of 75.40 with the Reserve Bank of Australia's (RBA) July meeting minutes stating that negative rates in Australia remain extraordinarily unlikely. 

The policymakers agreed that there was no need to adjust the package of measures in Australia in the current environment, minutes revealed. The central bank cut rates to record low of 0.25% in the second quarter and launched an asset purchase program after stock markets plunged in March coronavirus-induced recession fears.

While policymakers did not see the need for additional stimulus, they remained in favour of keeping rates low and maintaining the three-year bond yield target until progress is made toward full employment and inflation. 

The bank's stance on negative rates coupled with the risk-on action in the financial markets could continue to push the AUD/JPY pair higher during the day ahead. 

However, take note that the three-year bond yield drifted after its target of 0.25% last week. The RBA hasn't stepped up bond purchases yet, however, if the yield continues to rise, the central bank would feel pressure to enter the market, in which case, the bid tone around the Aussie dollar would weaken. 

At press time, AUD/JPY is trading largely unchanged on the day 75.27. 

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