AUD/JPY maintains position above 93.50 due to risk-on sentiment
- AUD/JPY advances as the Court’s blocking of Trump imposing tariffs improves risk sentiment.
- The Court of International Trade in Manhattan declared the Trump’s executive orders issued on April 2 unlawful.
- BoJ’s Ueda stressed the need to monitor potential spillover effects on shorter-maturity debt markets following rising super-long-term bond yields.
AUD/JPY continues its winning streak for the fifth successive day, trading around 93.60 during the European hours on Thursday. The currency cross rises due to risk-on sentiment after a three-judge panel at the Court of International Trade in Manhattan blocked President Donald Trump from imposing "Liberation Day" tariffs from taking effect.
The US federal found the President Trump exceeded his authority of imposing broad import tariffs and declared the executive orders issued on April 2 unlawful. The Trump administration put higher duties on imports from countries with large trade surpluses, such as China and the European Union, with introducing a 10% baseline tariff on most goods entering the US. Trump appears unlikely to back down, posted on his social media app Truth Social that he is on a "Mission from God".
The upside of the AUD/JPY cross could be restrained as the Australian Dollar (AUD) could face challenges due to hopes of the Reserve Bank of Australia (RBA) delivering further rate cuts in the upcoming policy meetings. Governor Michele Bullock stated that the RBA is prepared to take additional action if the economic outlook deteriorates sharply, raising the prospect of future rate cuts.
The Bank of Japan (BoJ) Governor Kazuo Ueda emphasized the importance of monitoring potential spillover effects on shorter-maturity debt markets after observing a surge in super-long-term bond yields. Ueda reflected growing caution about financial stability risks amid shifting interest rate dynamics in Japan. Ueda has said earlier that the BoJ is ready to adjust monetary policy as needed to meet its inflation targets.
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.
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