Dollar Strengthens: U.S.–China Trade Breakthrough Boosts Yen Exchange Rate

The U.S. dollar gained ground against the Japanese yen on Monday morning, following encouraging trade talks between the United States and China over the weekend. The optimism surrounding a potential reduction in the U.S. trade deficit helped push the dollar to 146.19 yen, marking a 0.6% daily gain and nearing its monthly high.

📊 Bessent and Greer Confirm Deal, Investors React Positively Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer announced after weekend negotiations in Geneva that the U.S. had reached a framework agreement with China aimed at gradually reducing the American trade deficit. The news helped ease fears of an escalating trade war. Although the dollar remains 3.5% weaker compared to its pre-tariff levels on April 2, the current sentiment suggests a possible reversal. Further rounds of U.S.–China talks are expected later today.

🌏 Currency Movements Around the World Other global currencies also responded to the market shift:

🔹 The New Zealand dollar rebounded by 0.3% to $0.5924 after a drop on Friday

🔹 The Australian dollar rose 0.2% to $0.6425

🔹 The euro dipped 0.2% to $1.1224

🔹 The British pound slipped 0.3% to $1.3277

📉 Markets Watching Inflation, Rates, and Tariff Policies Michael McCarthy, CEO of Moomoo Australia, argued that talk of the U.S. dollar losing its reserve status is premature. He expects markets to gradually normalize as global trade developments become clearer. According to McCarthy, this week’s key market drivers include U.S. inflation data (CPI) and Thursday’s U.S. retail sales and jobs reports, which will shed light on the effects of import tariffs on prices and consumer behavior. For Australia, unemployment data will be in focus.

🧮 Fed in No Rush, Markets Respond While Trump’s recent tariff increases put pressure on the dollar, last week brought support after the Federal Reserve signaled it’s in no hurry to cut rates. The probability of a rate cut in June has dropped to 17% (down from over 60% a month ago). Markets are now pricing in a 59% chance of a cut in July.

🪙 Gold Under Pressure as Risk Appetite Grows Rising investor risk appetite also hit gold. The safe-haven metal fell 1.7% to $3,268 per ounce, retreating from its April all-time high of $3,500.

🤝 U.S.–China Launch New Trade Dialogue? Scott Bessent called the weekend meeting a significant breakthrough, while Chinese officials confirmed both sides had reached a meaningful consensus and agreed to launch a new platform for economic dialogue. A joint statement is expected on May 12, though neither side has addressed the status of tariffs yet. Michael Brown, chief strategist at Pepperstone, noted there’s room for broader agreement between the two countries. Investors are hopeful the Trump administration will lower the current 145% tariff on Chinese goods, possibly back to the original 60% level previously outlined by the White House.

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