Most Asian currencies inched higher on Tuesday after the United States and China agreed to temporarily lower trade tariffs, easing concerns over escalating trade tensions. Investors around the world also turned their focus to upcoming U.S. inflation data, expected later in the day.
The U.S. Dollar Index, which tracks the dollar against a group of major currencies, slipped 0.2% during Asian trading hours. This followed strong gains the dollar had made in the previous session.
Yen, Yuan Strengthen on Trade Deal Optimism
On Monday, the U.S. and China announced they would reduce the heavy tariffs they had imposed on each other. Washington will lower its tariff rate on Chinese goods from 145% to 30%, while Beijing will cut its retaliatory tariff from 125% to 10%. The reductions will last for 90 days.
The decision was made public in a joint statement following trade talks held in Switzerland over the weekend.
“This was a larger-than-expected de-escalation and represents an upgrade to the outlook, though the negotiation process will likely remain challenging,” analysts at ING said in a note.
Following the announcement, the U.S. dollar rose sharply on Monday. However, it pulled back during Tuesday’s Asian session, giving a boost to regional currencies.
The Japanese yen strengthened, with the USD/JPY pair falling 0.4%. The Chinese yuan also gained, as both offshore (USD/CNH) and onshore (USD/CNY) pairs dropped 0.2%.
The Singapore dollar’s USD/SGD pair edged down 0.2%, and the Philippine peso’s USD/PHP pair slipped 0.4%. Australia’s dollar also rose 0.2%, helped by a slight rebound in consumer sentiment, according to a Westpac survey. The improvement was driven by stronger financial markets and falling fuel prices.
However, the South Korean won moved in the opposite direction. The USD/KRW pair rose 0.3%.
Global Eyes on U.S. Inflation Data, India-Pakistan Tensions
Investors worldwide are awaiting U.S. consumer price index (CPI) data for April, which will provide insights into inflation trends and the potential impact of President Donald Trump’s trade policies.
In South Asia, the Indian rupee’s USD/INR pair dropped 0.2% after a sharp fall in the previous session, which followed a ceasefire agreement between India and Pakistan.
Despite the ceasefire, tensions remain. On Monday, Indian Prime Minister Narendra Modi warned Pakistan that India would launch cross-border strikes on “terrorist hideouts” if provoked. He also dismissed what he called Pakistan’s “nuclear blackmail.”
The ceasefire agreement, brokered over the weekend by U.S. President Trump, followed the most intense fighting between the two countries in decades.
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