SINGAPORE, July 8 — The yen fell broadly today after US President Donald Trump reiterated that he plans to impose 25 per cent tariffs on goods from Japan and South Korea in the latest development of his chaotic trade war.
The Australian dollar charged higher after the country’s central bank defied market expectations and left its cash rate steady at 3.85 per cent.
Trump yesterday began telling trade partners — from powerhouse suppliers like Japan and South Korea to minor players — that sharply higher US tariffs will start August 1, but he later said that he was open to extensions if countries made proposals.
The announcement rattled investors and left the mood downbeat in Asia today.
The yen fell to a two-week low of 146.44 per dollar early in the session before recovering some losses.
The Japanese currency also sank to a one-year trough against the euro and hit its lowest against the British pound in eight months.
Prime Minister Shigeru Ishiba said today that he would continue negotiations with the US to seek a mutually beneficial trade deal.
“The Japanese government is expected to continue tariff negotiations, but with the Upper House election scheduled for July 20, the bar for reaching an agreement within the month appears high,” said economists at Morgan Stanley MUFG Securities.
The South Korean won fared better than its Japanese counterpart, rising 0.7 per cent to 1,366.35 per dollar, recovering from its 1 per cent fall yesterday.
South Korea said it planned to intensify trade talks with the United States.
“There is still a lot of uncertainty as to where tariff rates will eventually settle and which countries will get what rates, so uncertainty about the global economy is still high and that will keep investors on edge for the time being,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“This is just the start and we’ll get more headlines out for sure over the coming days.”
Other currencies, meanwhile, gained some ground today, after sliding in the prior session when the dollar rebounded.
The euro was up 0.27 per cent to US$1.1740, having slid 0.67 per cent yesterday, while sterling edged up 0.26 per cent to US$1.36375.
The European Union will not receive a letter from the United States setting out higher tariffs, EU sources familiar with the matter told Reuters yesterday, and is eyeing possible exemptions from the US baseline levy of 10 per cent.
Against a basket of currencies, the dollar last stood at 97.29, holding to some of its 0.5 per cent gain from the previous session.
RBA stuns markets
The Aussie last traded 0.75 per cent higher at US$0.6541, having advanced more than 1 per cent in a knee-jerk reaction to the RBA’s decision to stand pat on rates.
The move came as a shock for markets that had confidently wagered on a cut, with the central bank saying that the board “judged that it could wait for a little more information” to confirm that inflation was slowing.
Still, the board did note that the risks to inflation were more balanced and appeared to be waiting for a reading on second quarter prices due at the end of July before deciding.
“The uncertainty around Trump’s tariffs means that it doesn’t embolden a decisive decision, whereas the need for more assurance over inflation means they probably want to wait out this meeting and get into August,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho.
Markets shifted to imply around an 85 per cent chance the RBA would indeed cut to 3.60 per cent at its August 12 meeting, and now favours rates bottoming at 3.10 per cent rather than 2.85 per cent.
Elsewhere, the New Zealand dollar was last up 0.2 per cent at US$0.6014.
China’s yuan briefly weakened to a two-week low against the dollar on renewed investor worries over US tariffs, but it recouped early losses after major state-owned banks stepped in to support the currency. — Reuters
