Australian dollar rebounds after Trump tariffs pause

The news: The Australian dollar has rebounded from sustained pressure in the past few sessions, buoyed by risk-on flows and broad US dollar weakness, after US President Donald Trump announced a 90-day pause on tariffs for most countries.

The numbers: The local currency climbed to 61.57 US cents by 8.15am, and was up more than 2.6% since Wednesday’s close of 59.96 US cents. It had dropped to a five-year low of 59.29 US cents earlier this week in volatile trading after Trump announced hefty tariffs against all countries.

The context: The Aussie dollar strengthened during the overnight US trading session as the US dollar (USD) retreated amid a risk-on rally in global markets after the US President abruptly paused most tariffs for 90 days, sparking a surge in stocks and boosting risk-sensitive currencies.

However, gains for the local currency may be capped as markets remain wary of lingering trade tensions after Trump raised the levy on imports from China to 125%. Any global trade disruptions raise risks for Australia's exports-focused economy, which counts China as its biggest trading partner.