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21 Apr 2025

AUD/JPY falls below 90.50 due to rising odds of BoJ rate hikes

  • AUD/JPY continues to weaken as the Japanese Yen strengthens amid growing expectations of BoJ rate hikes.
  • BoJ’s Ueda signaled that further rate hikes remain on the table, provided that inflation trends align with the bank’s projections.
  • The PBoC opted to keep its LPRs unchanged, holding the one- and five-year rates at 3.10% and 3.60%, respectively.

The AUD/JPY pair extends its decline for a second straight session, hovering around 90.40 during Monday’s European trading hours. The Japanese Yen (JPY) continues to strengthen, supported by rising expectations that the Bank of Japan (BoJ) will persist with its interest rate hikes.

BoJ Governor Kazuo Ueda recently stated that Japan’s real interest rates remain very low and indicated that the central bank may continue raising rates if economic and price conditions evolve as projected. His sentiment was echoed by BoJ board member Junko Nagakawa, reinforcing market expectations of further tightening.

Meanwhile, risk sentiment remains fragile amid ongoing concerns over US President Donald Trump’s fluctuating stance on tariffs. The latest move by the White House to impose tariffs on Chinese vessels docking at US ports has raised fears of disruptions to global shipping, boosting demand for traditional safe-haven assets like the Yen.

However, losses in the AUD/JPY cross may be limited as the Australian Dollar (AUD) finds support following the People’s Bank of China’s (PBoC) decision to maintain its Loan Prime Rates, holding the one-year rate at 3.10% and the five-year at 3.60%.

The Aussie Dollar also drew strength from market concerns over the broader economic impact of US tariffs. Additionally, sentiment improved after Trump announced exemptions for key technology products—many of which are manufactured in China, Australia’s largest trading partner and a major buyer of its commodity exports.

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.

Apr 21, 2025

EUR/USD breaks above 1.1500 as Trump mulls over Powell’s removal

EUR/USD rallies to near 1.1570 at the start of the week, the highest level seen in three-and-a-half years. The major currency pair strengthens as the US Dollar (USD) falls further due to escalating doubts over its safe-haven status.
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Apr 21, 2025

USD/CHF plummets to its lowest level since 2015, below mid-0.8000s amid bearish USD

The USD/CHF pair attracts heavy selling at the start of a new week and plummets to levels just below mid-0.8000s, or the lowest since January 2015 during the first half of the European session.
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