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23 Apr 2025
AUD/JPY trades higher near 91.00 despite cautious remarks from Chinese Foreign Ministry
- AUD/JPY gains ground as robust Australian economic data and improved global sentiment fuel demand for the Australian Dollar.
- China’s Foreign Ministry criticized the US approach to trade talks, stressing that meaningful progress depends on dialogue rooted in equality.
- The Japanese Yen weakened as risk appetite improved, following Trump’s endorsement of Fed Chair Jerome Powell, which eased safe-haven demand.
AUD/JPY snaps a three-day losing streak, trading around 90.90 during Wednesday’s European session. The currency cross finds support as resilient Australian economic data and upbeat global sentiment boost demand for the Australian Dollar (AUD), despite cautious remarks from the Chinese Foreign Ministry.
The AUD/JPY cross holds gains as comments from the Chinese Foreign Ministry failed to deter AUD buyers. In response to US President Donald Trump’s comments about trade with China, China’s Foreign Ministry criticized Washington’s approach, emphasizing that true progress requires dialogue based on equality and mutual benefit. Trump struck an optimistic tone, stating that trade talks with China, Australia's key trading partner, were making headway. He clarified that while tariffs wouldn’t be as extreme as 145%, they also wouldn't be entirely lifted.
The AUD drew further strength from preliminary April data from Australia’s Judo Bank Purchasing Managers Index (PMI), which indicated the private sector expanded for a seventh straight month. Although the Manufacturing PMI eased slightly to 51.7 (from 52.1 in March) and Services PMI dipped to 51.4 (from 51.6), both sectors remained in expansion territory, underscoring steady economic momentum.
The Japanese Yen (JPY), meanwhile, weakened as risk appetite improved following Trump’s reaffirmed support for Federal Reserve (Fed) Chair Jerome Powell, reducing safe-haven demand. US Treasury Secretary Scott Bessent added to the optimistic tone, calling the ongoing US-China trade tensions “unsustainable” and expressing confidence in a resolution.
On the Japanese data front, the impact of mixed preliminary PMIs was limited. The Jibun Bank Composite PMI rose to 51.1 in April from 48.9, signaling renewed expansion. Services PMI improved to 52.2 from 50.0, supported by a rise in new and overseas orders, while Manufacturing PMI ticked up slightly to 48.5, continuing a ten-month contraction streak. Hopes for an interim US-Japan trade deal also buoyed sentiment.
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.