Asian Currencies Edge Higher as Dollar Steadies on US-China Tariff Truce
Most Asian currencies firmed slightly on Tuesday, while the U.S. dollar held steady after Washington and Beijing agreed to extend their trade tariff truce by 90 days. The move eased fears of a renewed trade war between the world’s two largest economies.
The Australian dollar, however, pared early gains after the Reserve Bank of Australia (RBA) cut interest rates as expected and signaled more easing in response to slowing inflation. Investors were also focused on upcoming U.S. inflation data for fresh clues on the Federal Reserve’s interest rate outlook.
Australian Dollar Slips After RBA Rate Cut
The AUD/USD currency pair reversed early strength to trade flat-to-lower following the RBA’s policy decision.
The RBA lowered its benchmark rate by 25 basis points to 3.60%, in line with forecasts. This marks the central bank’s third rate cut of the year, following the start of its easing cycle in the first quarter.
The bank expects underlying inflation to settle near the midpoint of its 2% to 3% annual target range and confirmed more rate reductions are likely. This comes after July’s surprise decision to hold rates steady.
Weak inflation and labor market data in recent weeks have strengthened expectations for further policy easing. Capital Economics analysts noted the RBA’s move supports market views that rates could drop below 3% by year-end.
However, the bank also highlighted ongoing uncertainty over demand and supply conditions in the Australian economy.
Chinese Yuan Gains as Trade Truce Extended
The USD/CNY pair dipped slightly, while the offshore USD/CNH fell 0.1%. The U.S. dollar index and dollar index futures traded flat after modest overnight gains.
China confirmed a 90-day delay in imposing additional tariffs on U.S. goods, shortly after President Donald Trump signed an executive order extending the trade truce with Beijing.
The decision keeps tariffs at lower levels and has boosted hopes for a more permanent trade agreement. ING analysts called the extension “an expected but welcome development” for markets.
US CPI Data in Focus
Traders are now watching the U.S. Consumer Price Index (CPI) report, due later today. The data is expected to influence expectations for a September Fed rate cut, especially after July’s weak labor numbers.
However, an inflation uptick could dampen rate-cut hopes, particularly if tariffs are driving prices higher.
Other Asian Currency Moves
The South Korean won’s USD/KRW fell 0.2%, while the Singapore dollar’s USD/SGD dropped 0.1% after Singapore raised its 2025 GDP forecast to 1.5%–2.5% from 0%–2.0%.
The Japanese yen’s USD/JPY rose slightly. The Indian rupee’s USD/INR climbed 0.1%, staying near record lows after Trump threatened tariffs of up to 50% on India for continuing to purchase Russian oil.
