FX Today: Yen rallies on intervention signals, Gold surpasses $5,100
Here is what you need to know on Monday, January 26
The Japanese Yen (JPY) comes into the spotlight at the start of the week, following signals from Japan's Prime Minister (PM) Sanae Takaichi over the weekend that the government could intervene to support the domestic currency against one-way excessive moves.
Hints of Japan’s intervention have strengthened the Yen, with the USD/JPY retracing further to near 154.00 from its over one-and-a-half-year high of 159.45 posted almost two weeks back.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.34% | -0.22% | -1.12% | -0.10% | -0.29% | -0.20% | -0.57% | |
| EUR | 0.34% | 0.12% | -0.77% | 0.23% | 0.05% | 0.15% | -0.24% | |
| GBP | 0.22% | -0.12% | -0.88% | 0.11% | -0.07% | 0.02% | -0.35% | |
| JPY | 1.12% | 0.77% | 0.88% | 1.02% | 0.82% | 0.92% | 0.54% | |
| CAD | 0.10% | -0.23% | -0.11% | -1.02% | -0.19% | -0.09% | -0.47% | |
| AUD | 0.29% | -0.05% | 0.07% | -0.82% | 0.19% | 0.09% | -0.27% | |
| NZD | 0.20% | -0.15% | -0.02% | -0.92% | 0.09% | -0.09% | -0.37% | |
| CHF | 0.57% | 0.24% | 0.35% | -0.54% | 0.47% | 0.27% | 0.37% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Meanwhile, the US Dollar (USD) is also underperforming its peers ahead of the United States (US) Durable Goods Orders data release of November at 13:30 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, posts a fresh four-month low near 97.00.
EUR/USD surges to near 1.1900 in the opening trade as the Euro (EUR) gains, with geopolitics and trade tensions between the United States (US) and several European Union (EU) nations being resolved. Going forward, investors will focus on the German IFO data for January, which will be published at 09:00 GMT.
GBP/USD trades slightly higher to near 1.3670 at the start of the light United Kingdom (UK) economic calendar week. Market sentiment and Bank of England (BoE) interest rate expectations are expected to dominate the Pound Sterling (GBP) going ahead.
USD/CAD extends its decline to near 1.3686 amid weakness in the US Dollar. Market expectations for both the Federal Reserve (Fed) and the Bank of Canada’s (BoC) monetary policy outcome on Wednesday will be key drivers for the pair.
AUD/USD approaches over two-year high of 0.6945 amid a weakened US Dollar. Meanwhile, Australian markets are closed on Monday due to Republic Day.
Gold price extends its winning streak for the sixth trading day on Monday. The yellow metal posts a fresh all-time high at $5,111.13, boosted by a weak US Dollar. Technically, a lower US Dollar makes the Gold price an attractive bet for investors.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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