Dollar strengthens against yen on positive US-China trade developments

The dollar climbed 0.6% to 146.19 yen in early Asian trade on Monday after weekend talks between the U.S. and China eased concerns of a trade war. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer on Sunday said a deal had been reached with China to cut the U.S. trade deficit.

The dollar rose by 0.1% and was trading near a one-month high. The currency is still down 3.5% following the April 2 announcement of U.S. President Donald Trump’s Liberation Day tariffs.

Dollar gains versus yen after U.S.-China trade optimism

DOLLAR UP 0.5% AT 146.20 YEN IN EARLY TRADE AMID US-CHINA TRADE HOPES — *Walter Bloomberg (@DeItaone) May 11, 2025

The U.S. dollar rose 0.6% to 146.19 yen on Monday’s Asian session. The currency climbed after the U.S.-China trade talks over the weekend eased concerns of a trade war between the world’s two biggest economies.

New Zealand’s kiwi dollar fell to around $0.588 on Friday but bounced back on Monday by 0.3% to $0.5924. The Australian dollar was up 0.2% to $0.6425, while the euro stood at $1.1224, down 0.2%. The Sterling plummeted by 0.3% to $1.3277.

U.S. Treasuries and equities slumped after Trump’s sweeping tariffs announcement last month, which shook confidence in American assets. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer said on Sunday after talks in Geneva that a deal had been reached with China to cut the U.S. trade deficit.

“I suspect that talk of the demise of the U.S. dollar as a reserve currency is premature and that we’ll see a more normal trading pattern resume once we have some clarity around global trade.”— Michael McCarthy, Chief Executive Officer of Moomoo Australia.

More talks between the two nations are also expected on Monday. U.S. earnings and data this week, including consumer price index (CPI) figures on Tuesday, are expected to indicate how the trade war has impacted the economy and expectations for rate hikes by the U.S. Federal Reserve.

McCarthy also argued that U.S. inflation data will be the most important for the U.S. this week, while Australian unemployment data will be the most important for Australia. He believes that trade talks will likely dominate market action this week.

The CEO of the Australia-based online trading platform said the upcoming U.S. CPI data for last month will give a fresh read of the impact of import levies on inflation. He added that April retail sales on Thursday will offer the latest window into consumer spending, as jobs data is also expected on Thursday for the U.S. and Australia.

McCarthy sees retail sales flatlining in April after a pre-tariff surge the month before.

Trump’s heightened levies have put the dollar under pressure in recent weeks, though it gained some support last week after the Fed signaled it was in no rush to cut interest rates again. The chance of a rate cut in June is 17%, down from more than 60% a month ago, while a July move is seen as a 59% chance.

The increase in risk appetite has also affected gold, which has been on a tear in recent weeks as investors sought the safety of the physical metal. Gold was down 1.7% at $3,268 an ounce, short of the April all-time high of $3,500.

U.S. secures deal with China in trade talks

U.S. Treasury Secretary Scott Bessent highlighted “substantial progress” in trade talks over in Geneva, while Chinese officials acknowledged that the sides had reached an important consensus and agreed to launch a new economic dialogue forum. A joint statement is expected later today, May 12, though it was clear that neither side mentioned tariff rates in the discussions.

Micheal Brown, a senior research strategist at Pepperstone, argued that there was evidently a broad framework under which the two nations could conduct further talks to reach a broader trade agreement. Investors are hoping that Trump’s administration will soon scale back the 145% tariff on Chinese goods, even if only to the 60% first flagged by the White House.