AUD/JPY recovers to near 89.50 as global sentiment improves

• AUD/JPY rebounds to around 89.40 in Tuesday's early European session, adding 1.06% on the day. 
• PBoC promised funding for sovereign funds to stablise markets hurt by US tariffs. 
• The economic uncertainty and risk-off mood could boost the safe-haven flows, benefiting the JPY. 

The AUD/JPY cross jumps to 89.40, snapping the three-day losing streak during the early European session on Tuesday. The improving global risk sentiment and encouraging stimulus plans from China provide some support to the Aussie. Traders await the Bank of Japan's (BoJ) Governor Kazuo Ueda speech later on Wednesday for fresh impetus. 

The People's Bank of China (PBoC) said early Tuesday that it will provide support to a sovereign fund when needed as it firmly supports its decision to buy more stocks. In a statement, China's central bank said that it will step up funding aid via a re-lending program to Central Huijin Investment Ltd. when it's necessary, as needed, to ensure capital market stability. Fresh China's stimulus plans could underpin the China-proxy Aussie as China is a major trading partner to Australia. 

Nonetheless, persistent trade-related uncertainty could boost demand for safe-haven currency like the Japanese Yen (JPY) and create a headwind for AUD/JPY. Japanese Prime Minister Shigeru Ishiba said late Sunday that Japan would continue pressing the United States to lower tariffs on Japanese goods but acknowledged that progress was unlikely to come overnight. 

US Treasury Secretary Scott Bessent said that he would lead the talks, underlining the importance of the US-Japan alliance and stating that the discussions will include tariffs, non-tariff barriers, currency policies, and government subsidies. Despite signaling a willingness to negotiate, Trump dismissed reports that he was considering a delay to new reciprocal tariffs and warned that levies could remain in place indefinitely.