AUD/JPY rises toward 93.00, rebounds due to easing safe-haven demand

• AUD/JPY advances with the shift in sentiment following renewed optimism surrounding US-China trade relations.
• Top diplomats from the US and China are scheduled to meet in Switzerland on May 10 to reignite stalled negotiations.
• The AUD receives support from optimism around a potential breakthrough in US-China trade talks.

AUD/JPY snaps a three-day losing streak and trades around 92.90 during European hours on Thursday, buoyed by waning demand for safe-haven assets like the Japanese Yen (JPY). The shift in sentiment follows renewed optimism surrounding US-China trade relations, with US Treasury Secretary Scott Bessent scheduled to meet China's top economic official in Switzerland on May 10 to reignite stalled negotiations.

Investor confidence also received a boost from US President Donald Trump, who hinted at a significant trade deal announcement. "Big News Conference tomorrow at 10:00 A.M., The Oval Office, concerning a MAJOR TRADE DEAL WITH REPRESENTATIVES OF A BIG, AND HIGHLY RESPECTED, COUNTRY. THE FIRST OF MANY!!!" he posted Wednesday night. This upbeat rhetoric has weighed on the JPY by reducing safe-haven flows.

Meanwhile, the Bank of Japan (BoJ) released the Minutes from its March 18-19 meeting, indicating policymakers' willingness to continue raising interest rates if economic and inflation targets are met. However, members expressed caution, citing elevated downside risks from evolving US policies. BoJ Governor Kazuo Ueda also highlighted the uncertainty around rising food prices and their impact on inflation, stating the bank will continue to monitor these factors closely.

Supporting the Australian Dollar (AUD), optimism around a potential breakthrough in US-China trade talks--critical for Australia's export-driven economy--has lifted sentiment. Additional support comes from the People's Bank of China's (PBoC) plans to cut key lending rates and reduce banks' reserve requirements to stimulate growth.

Australia's Ai Group Industry Index improved in April, though it still marked the 33rd consecutive month of contraction, particularly in manufacturing sectors tied to exports. These economic conditions have strengthened expectations that the Reserve Bank of Australia (RBA) could lower the cash rate by 25 basis points to 3.85% later this month.