AUD/JPY falls to near 109.50 as Australian Dollar struggles on geopolitical risks

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AUD/JPY loses ground after two days of gains, trading around 109.60 during the Asian hours on Thursday.

AUD/JPY falls as the Australian Dollar weakens after Trump’s remarks showed no clear Middle East de-escalation.
Australia’s Trade Surplus widened to AUD 5,686 million from a revised AUD 2,258 million previously.
New BoJ board member Toichiro Asada signaled a cautious, data-dependent stance in his first public remarks.

AUD/JPY loses ground after two days of gains, trading around 109.60 during the Asian hours on Thursday. The currency cross depreciates as the Australian Dollar (AUD) weakens after US President Donald Trump’s latest address showed no clear Middle East de-escalation, keeping geopolitical risk elevated.

The AUD remains subdued despite Australia’s Trade Surplus more than doubling in February to its highest level in seven months, supported by strong gains in gold and agricultural exports, while imports of gold and data processing equipment declined.

Australia’s Trade Surplus widened to AUD 5,686 million in February from a downwardly revised AUD 2,258 million previously, well above expectations of AUD 2,500 million and marking the largest surplus since July 2025. Meanwhile, Exports rose 4.9% MoM to a four-month high, recovering from a revised 1.6% decline, while imports fell 3.2% MoM to a seven-month low, reversing a revised 1.1% increase.

The downside of the AUD/JPY cross may be limited as the Japanese Yen (JPY) remains under pressure from rising oil prices, given Japan’s heavy reliance on Middle East crude imports. Trump signaled the US aims to conclude the conflict within two to three weeks, while warning that military operations could still intensify.

Meanwhile, new Bank of Japan (BoJ) board member Toichiro Asada adopted a cautious, data-dependent stance in his first remarks. Asada joins the nine-member board ahead of the April 27–28 policy meeting.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.