The Yen declined sharply on Tuesday following US President Donald Trump’s renewed announcement of 25% tariffs on imports from Japan and South Korea, marking the latest twist in his turbulent trade conflict.

Meanwhile, the Australian Dollar surged after the nation’s central bank surprised markets by keeping its cash rate unchanged at 3.85%, defying expectations of a cut.

On Monday, President Trump informed trade partners, ranging from major suppliers like Japan and South Korea to smaller nations, that steep US tariffs would take effect on 1^st August. However, he later indicated a willingness to delay the hikes if countries submitted viable proposals, Reuters reports.

The Yen bounced back from earlier losses against the Dollar, settling steady at 146.105, but weakened against several other currencies throughout the day.

Prime Minister Shigeru Ishiba stated on Tuesday that he intends to keep negotiating with the US to secure a trade agreement that benefits both countries.

“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,” stated Carol Kong, a Commonwealth Bank of Australia currency strategist.

“This is just the start and we'll get more headlines out for sure over the coming days.”

EU sources told Reuters on Monday that the European Union will not receive a tariff notice and may be granted exemptions from the US baseline 10% tariff rate.

Highlighting the differing outlooks for the trading partners, the Euro climbed to a one-year high against the Yen, finishing the day up 0.4% at 171.745.

The single currency also strengthened against the Dollar, gaining 0.4% to reach $1.1735, partially recovering from Monday’s 0.67% decline.

“The view of the market is that it's an extension, including in some cases more talks. So that's positive,” stated Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management.

“More of the same, less bad than feared with the door still open to negotiation, I can understand why the market is taking it in a relatively benign way,” he added.

Furthermore, the South Korean Won outperformed the Japanese Yen, climbing 0.66% to 1,366.12 per Dollar, bouncing back from Monday’s 1% drop.

Meanwhile, South Korea announced plans to ramp up trade negotiations with the United States.

The standout performer among major currencies on Tuesday was the Australian Dollar, which surged over 1% following the Reserve Bank of Australia’s unexpected decision to keep rates steady. At the time of writing, it was up 0.8% at $0.6545.

While markets had largely priced in a rate cut, the central bank explained that the board preferred to wait for additional data to confirm that inflation is easing.

Following this shift, markets now see about an 85% probability of a rate cut to 3.60% at the 12^th August meeting, with expectations adjusting to a rate floor of 3.10% instead of the previously anticipated 2.85%.