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AUD/JPY recovered losses on the back of the drop in US bond yields

AUD/JPY trades higher around 94.10 in the early European trading hours on Wednesday. The pair is rebounding from the losses recorded on Tuesday, with the resilience of the Australian Dollar (AUD) potentially linked to the drop in US bond yields. However, China’s weakening economic outlook raises concerns about potential reductions in demand for Australian exports, such as commodities and goods. This economic contraction can weigh on investor sentiment and lead to a decrease in demand for the Aussie.

On the other hand, Reuters Tankan unveiled its quarterly survey detailing business sentiment among Japanese companies. This dataset provides support to the Japanese Yen (JPY) due to the indication that both Large Manufacturing and Non-manufacturing sentiments have improved. Specifically, the Large Manufacturing sentiment index has climbed to +12 in August from the previous +3 in July. In a similar vein, the non-manufacturing sentiment has advanced, registering a reading of +32 in August, an increase from the +23 noted in July. Moreover, there is market speculation regarding the possibility of Japanese authorities intervening to safeguard the Japanese currency against the US Dollar (USD), similar to what was observed in September, 2022. It could play a key role in AUD/JPY price action.

Upbeat Japan's Gross Domestic Product (GDP) figures released on Tuesday also aided the Yen. This sentiment might have been reinforced by a statement made by the country’s Finance Minister Shunichi Suzuki. Suzuki mentioned that "rapid movements are undesirable and indicated that the government is prepared to respond in an appropriate manner, as reported by Reuters. Market participants will closely observe the upcoming data releases scheduled for Thursday. From the Australian economic calendar, the focus will be on Employment Change s.a. and Unemployment Rate figures for July. Additionally, attention will turn to Japan's National Consumer Price Index data set to be released on Friday. These data points are anticipated to provide crucial insights into the economic conditions of these respective countries and could impact trading decisions in the AUD/JPY pair.