AUD/JPY climbs to near 91.50 as decreasing safe-haven demand weighs on Japanese Yen
- AUD/JPY is advancing as the Japanese Yen softens, driven by reduced demand for safe-haven assets.
- President Trump signaled a willingness to ease tariffs on Chinese goods, while Beijing has announced exemptions for selected US imports.
- The de-escalation in trade tensions is also lending support to the commodity-linked Australian Dollar.
AUD/JPY gains ground after registering more than 0.50% losses in the previous session, trading around 91.50 during the European hours on Tuesday. The pair is gaining as the Japanese Yen weakens, with demand for traditional safe-haven assets declining amid renewed optimism over US-China trade relations.
US President Donald Trump has signaled a willingness to reduce tariffs on Chinese goods, while Beijing has granted exemptions for certain US imports previously subject to its 125% levies. These developments have raised hopes for a resolution to the prolonged trade dispute between the world’s two largest economies.
Given the strong trade ties between Australia and China, easing US-China trade tensions may provide support to the commodity-linked Australian Dollar (AUD). Market focus is now shifting to Australia’s inflation report, due Wednesday, which could shape expectations for future Reserve Bank of Australia (RBA) policy moves. The RBA is widely anticipated to deliver a 25-basis-point rate cut in May as it braces for potential economic fallout from recent US tariffs.
Meanwhile, the Bank of Japan (BoJ) is set to announce its policy decision on Thursday, with expectations for rates to remain unchanged amid concerns over the fragile domestic economy. However, signs of expanding inflation could leave the door open for future tightening. A swift trade agreement between the US and Japan could further bolster the BoJ’s confidence to consider rate hikes, marking a sharp contrast with the growing belief that slowing global growth may push the Federal Reserve toward deeper rate cuts.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.