US-China Agree to Unwind Recent Actions, while Greenback Consolidates Post Fed Move, and Yen Slumps after BOJ Stands Pat

By IFCCI News Desk | October 16, 2025

The United States and China have agreed to gradually unwind several recent trade and investment restrictions, signalling a tentative de-escalation in the world’s most closely watched economic relationship. The move comes as markets digest the Federal Reserve’s latest policy stance and react to the Bank of Japan’s decision to maintain its ultra-loose monetary policy, which sent the Japanese yen sharply lower.

Washington–Beijing Rapprochement Eases Trade Tensions

According to statements from both sides, the agreement includes the partial reversal of technology export curbs and a review of certain tariffs imposed since 2022. While details remain limited, U.S. Treasury officials described the step as a “technical recalibration” aimed at stabilising bilateral financial flows and rebuilding market confidence following months of escalating friction.

Chinese state media echoed a similar tone, noting that “pragmatic cooperation remains essential” amid slowing global growth and geopolitical uncertainties. Economists say the measured détente could support regional trade sentiment and lift investor outlook across Asian equities and currencies.

Dollar Consolidates After Fed Cues a Policy Pause

The U.S. dollar index (DXY) steadied near 104.6 after the Federal Reserve held rates steady but reaffirmed its data-dependent stance. Chair Jerome Powell reiterated that while inflation remains above the 2% target, the committee is observing “sustained signs of disinflation” across core sectors.

Market participants now anticipate that the Fed’s next policy adjustment could be a rate cut in the first quarter of 2026, contingent on continued labour market softness and moderating inflation expectations. Treasury yields slipped modestly, with the 10-year note trading near 4.12%, while equities saw a mild rebound following the dovish interpretation of Powell’s remarks.

Yen Weakens as Bank of Japan Maintains Ultra-Loose Policy

In contrast, the Japanese yen extended its decline, trading beyond 154 per U.S. dollar, after the Bank of Japan (BOJ) left its key policy settings unchanged. Governor Kazuo Ueda reaffirmed that the central bank would continue yield curve control (YCC) operations and asset purchases until inflation expectations show “durable convergence” toward the 2% target.

Analysts note that the widening yield differential between U.S. Treasuries and Japanese government bonds continues to pressure the yen. Intervention speculation resurfaced after Finance Ministry officials hinted at “closely monitoring excessive currency moves,” though market participants doubt any imminent action.

Market Outlook: A Crossroads for Policy and Trade Stability

The combination of U.S.-China trade reconciliation, Fed patience, and BOJ inaction underscores a shifting macroeconomic balance. Investors are weighing whether recent developments mark the beginning of a more stable policy environment or a temporary reprieve ahead of renewed volatility.

For now, the greenback remains broadly supported, Asian markets are tentatively optimistic, and attention turns to upcoming U.S. inflation data and China’s quarterly GDP report — both of which could influence the next leg in global currency realignment.