ForexLive Asia-Pacific FX news wrap: Ueda slams the yen lower

The US dollar slipped to a six-week low (before rebounding) as a cocktail of poor economic data and rising concerns over President Trump’s escalating trade war weighed on sentiment. Softer-than-expected factory figures, combined with fiscal risks tied to newly announced tariff hikes, drove fresh selling in the greenback. Commodity-linked currencies outperformed, with the Australian and New Zealand dollars gaining ground ahead of key labour market reports and amid rising investor caution over global growth.

In Asia, China’s manufacturing sector took a hit in May as the Caixin PMI dropped to 48.3, snapping an eight-month expansion streak. The decline, attributed largely to a slump in export demand amid renewed US tariffs, saw output, new orders, and employment all fall. Input and output prices remained weak, though firms expressed cautious optimism for a trade recovery, particularly if tensions with Washington ease.

The Japanese yen fell sharply after Bank of Japan Governor Kazuo Ueda said the central bank is prepared to raise interest rates—provided economic and price conditions rebound in line with forecasts. Ueda pointed to rising domestic wages and underlying inflation as justification for future hikes, while noting that the recent jump in food prices was likely transitory. Still, he warned against pre-committing to a path amid heightened global trade uncertainty.

Ueda also touched on the BoJ’s JGB tapering plans, see points above. The comments reinforced the view that the central bank is slowly preparing to exit ultra-easy policy, but will remain sensitive to volatility in global markets and fiscal policy moves elsewhere, including the U.S.

Australia’s Fair Work Commission announced a 3.5% increase in the national minimum wage, effective from July, offering a boost to low-income workers as inflation pressures ease. The hike comes amid tentative signs that real wages—measured against inflation—are beginning to turn positive again after a long stretch of negative growth. The move is also expected to feed into upcoming wage and employment data, which the Reserve Bank of Australia will closely monitor ahead of future policy decisions.

Minutes from the Reserve Bank of Australia’s May meeting revealed the Board weighed rate cuts of 25 or 50 basis points, ultimately settling on the smaller move to maintain a cautious and predictable policy path. While progress on inflation and signs of tightness in the labour market supported a rate reduction, the RBA was not convinced that a larger cut was necessary, especially given the risk of needing to reverse course if global conditions improved.

The minutes highlighted concerns over downside risks to household consumption and the potential fallout from worsening global trade tensions. While US tariff policy was flagged as a significant negative for the global outlook, the RBA noted it had not yet materially affected the Australian economy. The Board agreed it wasn’t time to shift to a clearly expansionary stance but stressed policy was well positioned to respond swiftly if global conditions deteriorate further.

Elsewhere, geopolitics edged back into focus after Donald Trump declared the U.S. “will not allow any enrichment of uranium” by Iran, renewing concerns over tensions in the Middle East. The remark adds a layer of uncertainty to an already jittery market navigating trade battles and shifting central bank signals.

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As mentioned, the USD declined early but rebounded. JPY strengthened early but slost ground on Ueda.

EUR, AUD, NZD, GBP, CAD have all given gains back during the session, AUD and NZD are notably weak as I update.