Analysts at MUFG have recommended going long on the Australian dollar against the Japanese yen, citing the diminishing impact of currency intervention and an improved environment for carry trades as traders scale back expectations of Federal Reserve rate hikes.

"We forecast the AUD/JPY pair to continue recovering the losses triggered by intervention, as there have been no fundamental changes substantial enough to support a sustained yen appreciation," MUFG analysts Derek Halpenny, Lee Hardman, and Abdul-Ahad Lockhart wrote in a report.

They set a target for AUD/JPY at 114.50, with a stop-loss level at 109.20.

"The weaker-than-expected US July non-farm payrolls report has lowered market expectations for further Fed rate hikes, alleviating a key risk to financial market stability," they stated. "Consequently, the current environment remains favorable for carry trades, bolstering demand for high-yielding G10 currencies like the Australian dollar."