The Euro edged closer to its highest point in almost four years on Thursday, while the Yen maintained its gains after positive developments in trade agreements between the United States and its major trading partners boosted overall market sentiment.
Most currencies largely ignored the news that US President Donald Trump, known for his criticism of Federal Reserve Chair Jerome Powell, would be visiting the central bank, a surprise visit that heightened tensions between the administration and the Fed.
Meanwhile, markets remained focused on ongoing tariff negotiations.
According to two European diplomats on Wednesday, the European Union and the US were progressing toward a trade deal that might set a 15% US baseline tariff on EU goods, along with potential exemptions.
This followed Washington’s trade agreement with Tokyo, which reduced tariffs on auto imports and exempted Japan from harsh new levies on other products in return for a $550 billion commitment in US-bound investments and loans, Reuters reports.
Global markets reacted favourably to these developments, with risk assets rallying and investors moving away from the US Dollar.
The risk-sensitive Australian dollar climbed to an eight-month peak of $0.6620 on Thursday.
The Euro held steady at $1.1773, remaining close to the $1.1830 high it reached earlier this month, its strongest level in over three years.
“These trade frameworks agreed between the US and the major economies are definitely positive for risk sentiment,” stated Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“We actually anticipated a risk of the US and the European Union getting into retaliation mode…but that risk of a retaliation seems to have dissipated.”
Against the Yen, the Dollar dropped 0.26% to 146.07, marking its fourth consecutive session of decline against the Japanese currency.
Although Japan’s trade deal has boosted domestic stocks, the yen’s gains have been limited due to ongoing political uncertainty within the country.
Japanese Prime Minister Shigeru Ishiba denied on Wednesday reports and a source claiming he intended to resign following a heavy defeat in the upper house elections, rejecting suggestions that he had made a decision to step down.
“In the near term, the Yen will still face headwinds from ongoing political uncertainty. We still don't know what Prime Minister Ishiba will do…so I think there is still some uncertainty with regard to the fiscal outlook in Japan and Bank of Japan policy,” Kong stated.
Elsewhere, Sterling remained strong at $1.3575, after gaining 0.36% in the previous session. Whereas the Dollar index slipped slightly to 97.18, and the New Zealand Dollar edged up 0.08% to $0.6052.