AUD/JPY holds gains above 96.00, upside seems limited due to Trump's tariff threats


  • AUD/JPY may lose ground as risk aversion rises, driven by renewed tariff threats from US President Donald Trump.
  • Trump stated that China would face tariffs, with his administration actively working on their implementation.
  • Tokyo's Consumer Price Index climbed to 3.4% YoY in January, reaching its highest level since April 2023.

AUD/JPY halts its two days of losses, trading around 96.00 during the Asian hours on Friday. However, the upside of the AUD/JPY cross could be restrained as the Australian Dollar (AUD) may struggle amid the increased likelihood of the Reserve Bank of Australia (RBA) rate cut in February.

The ASX 30-Day Interbank Cash Rate Futures February 2025 contract indicates a 95% expectation of a 25 basis point reduction in the cash rate to 4.35% at the central bank’s meeting on February 18. Additionally, ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the RBA in February.

Additionally, the AUD could face challenges amid increased risk aversion US President Donald Trump reiterated his plan on Thursday to impose 25% tariffs on Canada and Mexico but did not specify a timeline for China. However, Trump stated that China would also face tariffs, with his administration actively working on their implementation.

Given China's significant trade relationship with Australia, any indication of a renewed US-China trade war could put downward pressure on the AUD. Trump also announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.

The Japanese Yen (JPY) may strengthen as expectations for further interest rate hikes by the Bank of Japan (BoJ) grow, capping the upside of the AUD/JPY cross. On Friday, the Statistics Bureau of Japan reported that Tokyo's headline Consumer Price Index (CPI) rose to 3.4% year-over-year in January, from the previous 3.0% increase, marking its highest level since April 2023.

Additionally, core CPI, which excludes volatile fresh food prices, increased to 2.5% YoY, from 2.4% in December, reaching an 11-month high. Meanwhile, a core CPI measure that strips out both fresh food and energy prices edged up to 1.9% YoY in January from the previous 1.8%, staying close to the BoJ's 2% annual target.

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.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD keeps the bullish bias intact around 1.0500

EUR/USD keeps the bullish bias intact around 1.0500

A mild rebound in the Greenback prompts EUR/USD to recede from earlier peaks and settle around the 1.0500 neighbourhood on Tuesday, while market participants keep monitoring developments around US tariffs.

EUR/USD News
GBP/USD comes under pressure, revisits 1.2650

GBP/USD comes under pressure, revisits 1.2650

GBP/USD failed to extend its rebound further north of the 1.2680 zone on Tuesday, sparking instead a corrective move to the mid-1.2600s amid a mildt bounce in the Greenback.

GBP/USD News
Gold deflates below $2,900, six-day lows

Gold deflates below $2,900, six-day lows

The corrective move in Gold prices remains well and sound and now prompts the yellow metal to breach the key $2,900 mark per ounce troy despite the intense downside bias in the US Dollar and the generalised decline in US yields.

Gold News
Bitcoin edges below $90,000, ending its long streak of consolidation

Bitcoin edges below $90,000, ending its long streak of consolidation

Bitcoin (BTC) continues to trade in red, reaching a low of $88,200 during Tuesday’s early Europen trading session and hitting the lowest level since mid-November after falling 4.89% the previous day. 

Read more
Five fundamentals for the week: Fallout from German vote, Fed's favorite figure stand out

Five fundamentals for the week: Fallout from German vote, Fed's favorite figure stand out Premium

Statements, not facts, are set to dominate the last week of February. Further fallout from Germany's elections and new comments from Trump on trade may overshadow most figures –but not the Fed's favorite inflation figure.

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025