The Australian dollar led the charge against the U.S. dollar on Friday, boosted by signals of a potential thaw in trade relations between the U.S. and China. Risk-sensitive currencies like the Australian and New Zealand dollars made gains, with Asian shares continuing their rally from Wall Street’s positive performance. China’s offshore yuan also rose to a near one-month high. The U.S. dollar, however, was still on track to post a third consecutive weekly advance, despite the recent gains in other currencies. The greenback had faced significant declines last month, driven by President Donald Trump’s unpredictable tariff policies, which sparked recession fears and dampened confidence in U.S. assets.
The dollar had been hit hard by the fallout from tariffs, but now, there seems to be a market normalization, as traders balance their concerns about the economic situation with cautious optimism for positive developments in China. U.S. Secretary of State Marco Rubio hinted at upcoming trade talks between the U.S. and China, following a Chinese state media report that suggested Beijing’s openness to discuss tariffs. This statement from China’s Commerce Ministry indicated that Beijing was evaluating an offer from Washington for talks, further fueling hopes of a trade resolution.
The Australian dollar rose by 0.5% to $0.6412, while New Zealand’s kiwi dollar gained 0.4% to $0.5932. Both currencies, often seen as proxies for the yuan due to their close trade relations with China, have been benefiting from improved sentiment in Asia. The offshore yuan reached 7.2519 per U.S. dollar, the strongest level since April 4, as mainland China markets were closed for a holiday.
In the U.S., stocks rose on Thursday, supported by strong tech earnings and a better-than-expected manufacturing report, although the data still showed factory activity had contracted. The dollar index dipped by 0.2%, but it was still set to gain 0.3% for the week amid relatively light trading due to holidays. The greenback was trading at 145.17 yen, having earlier reached its highest level since April 10. The yen had weakened after the Bank of Japan kept interest rates unchanged and lowered its growth forecasts, signaling a pause in rate hikes to assess the impacts of U.S. tariffs.
Market attention now turns to the upcoming nonfarm payrolls report, with economists forecasting 130,000 new jobs for the previous month, compared to 228,000 in March. Analysts believe the Federal Reserve will continue to monitor labor market conditions while focusing on inflation, awaiting more data before making further rate decisions.
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