AUD/JPY climbs to near 91.50 as decreasing safe-haven demand weighs on Japanese Yen

• AUD/JPY is advancing as the Japanese Yen softens, driven by reduced demand for safe-haven assets.
• President Trump signaled a willingness to ease tariffs on Chinese goods, while Beijing has announced exemptions for selected US imports.
• The de-escalation in trade tensions is also lending support to the commodity-linked Australian Dollar.

AUD/JPY gains ground after registering more than 0.50% losses in the previous session, trading around 91.50 during the European hours on Tuesday. The pair is gaining as the Japanese Yen weakens, with demand for traditional safe-haven assets declining amid renewed optimism over US-China trade relations.

US President Donald Trump has signaled a willingness to reduce tariffs on Chinese goods, while Beijing has granted exemptions for certain US imports previously subject to its 125% levies. These developments have raised hopes for a resolution to the prolonged trade dispute between the world's two largest economies.

Given the strong trade ties between Australia and China, easing US-China trade tensions may provide support to the commodity-linked Australian Dollar (AUD). Market focus is now shifting to Australia's inflation report, due Wednesday, which could shape expectations for future Reserve Bank of Australia (RBA) policy moves. The RBA is widely anticipated to deliver a 25-basis-point rate cut in May as it braces for potential economic fallout from recent US tariffs.

Meanwhile, the Bank of Japan (BoJ) is set to announce its policy decision on Thursday, with expectations for rates to remain unchanged amid concerns over the fragile domestic economy. However, signs of expanding inflation could leave the door open for future tightening. A swift trade agreement between the US and Japan could further bolster the BoJ's confidence to consider rate hikes, marking a sharp contrast with the growing belief that slowing global growth may push the Federal Reserve toward deeper rate cuts.