07:20 AM EDT, 10/14/2025 (MT Newswires) -- The worst-performing currencies during the Asian trading session on Tuesday were the G10 commodity currencies of the Australian (AUD) and New Zealand (NZD) dollars, said MUFG.

It resulted in the AUD/USD rate falling to a fresh low as it moves closer to support from the 200-day moving average that comes in at around 0.6420, wrote the bank in a note to clients.

Weakness in the commodity currencies reflects renewed concerns amongst market participants that the new phase of escalating trade tensions between China and the United States could reinforce headwinds for the global economy, stated MUFG. As International Monetary Fund Managing Director Kristalina Georgieva noted last week, the global economy has been coping better than feared this year, but she cautioned that global resilience hasn't yet been fully tested.

President Donald Trump's threat to raise U.S. tariffs on imports from China by 100% from Nov. 1 would pose a bigger challenge for the global economy to absorb.

Risk sentiment has taken a hit overnight Monday after China threatened further retaliatory measures against U.S. curbs on its shipping sector, after sanctioning American entities of a South Korean shipping giant. China's Ministry of Commerce announced it was placing limits on five U.S. entities of Hanwha Ocean Company, which is one of South Korea's biggest shipbuilders. The Ministry of Transport is also conducting a probe into the impacts from the U.S. Trade Representative's Section 301 investigation into China's maritime sector, and may implement retaliatory measures in due time.

The latest news will add to investor concerns that the Trump administration will follow through and implement higher tariffs in response to China's recent decision to tighten controls on rare earth minerals and actions against U.S. shipbuilders, added the bank. There is a higher risk now that trade tensions between China and the U.S. will escalate further in the near term before de-escalating again.

As investors saw earlier this year, China and the U.S. are unlikely to tolerate much higher tariffs above 100% for long, which will put pressure on both sides to reach an agreement to de-escalate and reverse tariff hikes, according to MUFG. The current escalation phase of trade tensions poses downside risks for Asian and commodity-related currencies, and could trigger an unwind of popular carry trades as financial market volatility picks up.