The Japanese yen fell broadly on Tuesday while the US dollar held firm, as currency markets reacted to the latest salvo in President Donald Trump’s chaotic trade war: the unveiling of 25% tariffs on goods imported from key US trading partners Japan and South Korea.
President Trump on Monday began notifying trade partners—ranging from manufacturing powerhouses like Japan and South Korea to minor players—that sharply higher US tariffs are set to take effect on August 1.
He later indicated that he was open to extending this deadline if countries made concrete proposals, but the initial announcement was enough to rattle investor sentiment.
The Japanese yen and the South Korean won both felt the immediate impact, each dropping roughly 1% overnight. The pressure continued into Tuesday’s trading session, with the yen falling to a two-week low of 146.44 per dollar.
The South Korean won, however, later managed a partial recovery, rising 0.4% to 1370.20 per dollar.
Investors had entered the week already grappling with considerable confusion over President Trump’s tariff plans ahead of an initial July 9 deadline.
While the new August 1 date for implementation offers a brief reprieve, the overall outlook remains deeply uncertain, and concerns about the global economy persist.
“There is still a lot of uncertainty as to where tariff rates will eventually settle and which countries will get what rates, so uncertainty about the global economy is still high and that will keep investors on edge for the time being,” commented Carol Kong, a currency strategist at Commonwealth Bank of Australia.
This is just the start and we’ll get more headlines out for sure over the coming days.
In response to the tariff announcement, Japanese Prime Minister Shigeru Ishiba said on Tuesday that Japan would continue its negotiations with the United States, seeking a trade deal that would be mutually beneficial.
South Korea has also said it plans to intensify its trade talks with the US, viewing President Trump’s plan for a 25% tariff from August 1 as an effective extension of the grace period for implementing reciprocal tariffs.
The dollar holds its ground, other currencies rebound
While the yen stumbled, other major currencies managed to regain some ground on Tuesday after sliding against a rebounding US dollar in the previous session.
The euro was up 0.27% to $1.1741, following a 0.67% slide on Monday. Sterling also edged up 0.17% to $1.3626.
Notably, the European Union does not expect to receive a letter from the United States setting out higher tariffs, according to EU sources familiar with the matter who spoke to Reuters on Monday.
The bloc is reportedly eyeing possible exemptions from the U.S. baseline levy of 10%.
Against a basket of currencies, the US dollar was little changed at 97.40, successfully holding on to most of the 0.5% gain it had registered on Monday.
The Australian dollar last traded 0.32% higher at $0.6513, recovering some ground after tumbling 0.9% in the previous session as risk appetite had soured.
The New Zealand dollar also advanced, up 0.22% to $0.6015, reversing some of Monday’s 0.8% fall.
Eyes on the RBA: rate cut expected in Australia
Market participants are now closely watching the Reserve Bank of Australia (RBA), which is set to announce its interest rate decision later on Tuesday.
Expectations are high that the central bank will deliver another rate cut, a move prompted by easing inflation and a slowing domestic economy.
“Given the ever-shifting balance of risks and the heightened uncertainty it creates for hiring and investment in the Australian economy, more RBA cuts are set to follow,” said Carl Ang, a fixed income research analyst at MFS Investment Management.
“A 3.1% terminal rate by early 2026 remains the base case for this RBA cutting cycle.”
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