Asian currencies have paused their rally against the dollar, but the Bloomberg Asia Dollar Index’s clear uptrend suggests potential for further gains, possibly driving reserve flows into the Euro, Yen, and Gold as dollar-rich Asian nations look to hedge. Ukraine is contemplating shifting its currency, the hryvnia, from a dollar peg to a closer Euro alignment, reflecting its growing European ties and global trade fragmentation. In the Eurozone, March retail sales met expectations at -0.1% MoM and 1.6% YoY, signaling cautious consumer spending due to trade uncertainty and sluggish income growth, while Germany’s factory orders surged 3.6% MoM—exceeding the 1.3% forecast—hinting at industrial stabilization despite looming tariff threats, and its Construction PMI rose to 45.1, the highest in over two years, though still in contraction.

The Bank of Japan’s March meeting minutes revealed a lack of consensus on the timing of future rate hikes, with board members expressing caution over the potential negative impacts of U.S. tariffs on Japan’s economy, some urging nimble action and others suggesting a shift to a neutral stance after a possible hike. Governor Ueda reaffirmed the BOJ’s intent to raise borrowing costs if economic projections hold, despite elevated inflation pressures, with outcomes heavily dependent on U.S.-Japan trade talks, where the U.S. has rejected Japan’s full tariff exemption, offering only to negotiate a reduction in the 14% Japan-specific tariff, though negotiator Ryosei Akazawa remains hopeful for a June agreement. The BOJ will release a summary of opinions from its April 30-May 1 meeting on May 13, shedding further light on its stance amid ongoing trade uncertainties.

We’ve seen some profit taking on the Australian Dollar as the U.S. and China begin trade war negotiations in Switzerland, with Treasury Secretary Bessent and China-skeptic negotiator Greer meeting Vice Premier He Lifeng. Outcomes remain uncertain and Trump, during David Perdue’s swearing-in as ambassador to China, denied U.S. initiation of talks and rejected tariff reductions. The ASEAN Plus Three group pledged to counter global trade shocks through increased regional trade, aligning with a broader Asian push to reduce dollar dependency, while the Bloomberg Asia Dollar Index’s pause doesn’t rule out further dollar hedging, potentially supporting the Yuan and, by extension, the Australian Dollar as a Yuan proxy. Certainly, China’s recent economic stimulus measures have been supporting the Australian Dollar as well.