Asian Currencies Steady as U.S.-China Tensions Flare; Yen Weakens on Japan Turmoil
Most Asian currencies traded quietly on Monday as investors turned cautious amid renewed U.S.-China trade tensions, while the Japanese yen weakened due to growing political uncertainty in Japan.
The U.S. Dollar Index, which tracks the greenback against six major peers, slipped 0.1% after posting weekly gains. Dollar Index Futures were mostly unchanged as of 05:14 GMT.
Trump Reignites Trade Fears, Then Softens Tone
President Donald Trump renewed trade concerns on Friday after threatening to impose tariffs of up to 100% on Chinese imports bound for the United States, along with new export restrictions on sensitive technology.
However, Trump softened his tone over the weekend, assuring markets to “not worry about China” and suggesting that Washington does not plan to escalate tensions in the short term. The shift helped stabilize sentiment, though traders remained alert to possible policy volatility.
“We are not convinced this trade escalation is over based on Trump’s comments,” analysts at MUFG wrote in a note. “Given the wide gap between U.S. and Chinese expectations, markets could stay volatile, with both realized and implied volatility rising from current low levels.”
Meanwhile, China’s trade data on Monday showed that exports and imports outperformed expectations, signaling resilience despite weaker domestic demand and rising geopolitical pressure. The onshore yuan (USD/CNY) remained largely unchanged.
Yen Drops as Japan’s Coalition Split Deepens
The Japanese yen led regional losses, with the USD/JPY pair climbing 0.5% to 151.90. The decline followed news that Japan’s Komeito party had withdrawn from the governing coalition, clouding the prospects of Sanae Takaichi, the ruling party’s candidate, in her bid to become the next prime minister.
The political turmoil has raised questions about Japan’s fiscal policy and economic direction. Takaichi, known for supporting aggressive stimulus measures, faces uncertainty that could prompt the Bank of Japan to maintain its ultra-loose monetary policy for longer.
Regional Currency Moves
Elsewhere in Asia, the Singapore dollar (USD/SGD) and South Korean won (USD/KRW) traded flat. The Australian dollar (AUD/USD) rose 0.7%, supported by its reputation as a high-yielding risk proxy. The Indian rupee (USD/INR) remained mostly stable throughout Monday’s session.
