• AUD/JPY loses ground due to hawkish sentiment surrounding the BoJ.
• The safe-haven flows amid rising geopolitical tensions provide support for the Japanese Yen.
• The downside of the currency cross could be limited due to the risk-on mood, along with the hawkish RBA.

AUD/JPY depreciates to near 97.50 during the early European hours on Monday. The downside of the AUD/JPY cross is attributed to the improved Japanese Yen (JPY), driven by hawkish sentiment surrounding the Bank of Japan (BoJ) regarding its policy outlook.

Last week’s data showing growth in Japan’s second-quarter GDP supports the potential for an interest rate hike by the BoJ in the near term. On Monday, Japan’s Machinery Orders, a key indicator of capital expenditure, increased by 2.1% month-on-month in June, surpassing the forecasted 1.1% rise. Markets are now anticipating Japanese inflation figures later this week for further insight into the Bank of Japan’s monetary policy direction.

Additionally, the safe-haven flows amid rising geopolitical tensions might have supported the Japanese Yen. Hamas has rejected the terms for a hostage release-ceasefire deal discussed in Doha on Thursday and Friday, according to Reuters citing a local news agency Times of Israel. Additionally, concerns about escalating tensions between Ukraine and Russia were heightened as Ukraine initiated the largest invasion of Russia since World War II.