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12 May 2025

AUD/JPY surges to near 94.50 as joint statement confirms 90-day halt in tariff escalations

  • AUD/JPY climbs amid renewed global trade optimism following encouraging progress in US-China trade talks.
  • A joint statement confirmed the US will suspend 24 percentage points of tariffs on Chinese goods for an initial 90-day period.
  • Japan’s Current Account surplus increased to JPY 3,678.1 billion in March, up from JPY 3,447.8 billion a year earlier.

AUD/JPY climbed more than 1.50% during European trading hours on Monday, reaching around 94.60, driven by a more optimistic global trade sentiment following positive developments in US-China trade negotiations.

The Australian Dollar (AUD), closely tied to China due to strong trade relations, gained ground after the release of a joint statement from high-level talks held over the weekend in Geneva, Switzerland. The statement confirmed that the United States would suspend 24 percentage points of its tariff rate on Chinese goods for an initial 90-day period.

At a scheduled briefing, US Treasury Secretary Scott Bessent highlighted the importance of the agreement, pointing to a 90-day halt in tariff escalations and a significant 115% reciprocal reduction in tariffs. He emphasized the constructive rapport between the two sides and their focus on advancing national interests.

Echoing similar sentiments, US Trade Representative Jamieson Greer praised the mutual respect and understanding achieved during the discussions. He acknowledged that while both sides are committed to the 90-day pause, challenges such as the fentanyl issue remain unresolved.

Meanwhile, the Japanese Yen (JPY) weakened as the positive trade news dampened demand for safe-haven assets. However, downside pressure on the JPY may be limited following Japan’s latest Current Account data.

Japan posted a non-seasonally adjusted current account surplus of JPY 3,678.1 billion in March, up from JPY 3,447.8 billion a year earlier and broadly in line with expectations. Trade Balance - BOP Basis reported that goods account surplus widened to JPY 516.5 billion from JPY 463.5 billion, supported by a 1.8% year-on-year rise in exports, which outpaced the 1.3% increase in imports.

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

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May 12, 2025

NZD/USD falls to near 0.5900 following a 90-day pause in US-China tariff escalation

NZD/USD remains under pressure, trading near 0.5900 during early European hours on Monday, despite an improved global trade mood following positive developments in US-China trade talks.
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May 12, 2025

US Dollar Index (DXY) surges past 101.00, hits one-month top on US-China trade deal optimism

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, catches aggressive bids at the start of a new week and rallies to over a one-month top, around the 101.35-101.40 region during the early European session.
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