The Japanese yen weakened 5 percent on Tuesday as investors’ risk appetite ticked up after President Donald Trump cancelled plans to tariffs on Mexico, though new U.S. trade pressures against China tempered general market sentiment.

Over a year ago financial markets have been affected by worries of rising trade spats between United States and China the world’s biggest economies, fueling concerns over the outlook for economic growth.

The U.S. dollar gained close to 0.2 percent versus the Japanese yen, extending a similar benefit in the last session.

The U.S. dollar index edged up 0.05 percent to 96.799, climbing 0.2 percent gain achieved overnight.

Trump said on Monday he was ready to impose another round of punitive tariffs on Chinese imports if he cannot make progress in trade deal with China’s President at the G20 summit in Osaka, Japan near the end of the month.

President Donald Trump has repeatedly said he anticipated meet President Xi Jinping at the G20 meeting.

"It might not happen if the Chinese side thinks there isn't any point in having a meeting if the opinions are far apart from the start," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

"Trump has been applying pressure by emphasizing there will surely be a meeting, but it isn't clear what the Chinese side will do."

“Investors were hesitant to take on more risk because of "uncertainty" about what Trump does in relation to China ahead of the G20 summit,” he added.


"The lift from the U.S.-Mexico trade development is likely to be a temporary one for the equity markets as the bigger issue between the United States and China remains unresolved," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

"Nervousness will prevail in the markets until the G20 summit. And there is no guarantee that matters will improve even if the U.S. and Chinese leaders meet at the summit."

"The avoidance of tariffs on Mexican goods are supporting risk sentiment," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

The Chinese yuan was last gained 0.2 percent at 6.9310 yuan per dollar in offshore trade withdrawing back a previous loss.

The Australian dollar was steady at $0.6961, recovering after falling to a one-week low previous in the session.

The euro was slightly moved at $1.1314.

The euro rose a week ago after the ECB said rates would remain "at their present levels" until mid-2020 rather than hinting at rate cuts, as some had expected.


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