Economic Overview - The yen trimmed losses from the previous day amid thin trading conditions due to holidays in Asia and the U.S. [1] - Key economic events this week include the release of the Federal Reserve's meeting minutes and advance figures on U.S. GDP [1][10]. U.S. Economic Sentiment - Kristina Clifton, a senior currency strategist, expressed a positive outlook on the U.S. economy, anticipating a high chance of a June interest rate cut, with a follow-up cut expected in July [2]. - The dollar index remained stable at 97.12 after a 0.2% gain in the previous session, while the euro fell by 0.06% to $1.1843 [5][10]. Currency Movements - The yen strengthened by 0.15% to 153.28 per dollar, while the British pound weakened by 0.07% to $1.3616 [6][10]. - The Australian dollar decreased by 0.07% to $0.7064, and New Zealand's kiwi fell by 0.08% to $0.6026 ahead of the Reserve Bank of New Zealand's policy meeting [8][11]. Inflation and Monetary Policy - U.S. consumer prices rose less than expected in January, providing the Federal Reserve with more flexibility for policy easing this year [6][10]. - Money market traders are pricing in 62 basis points of easing for the remainder of the year, indicating two quarter-point cuts and a 50% chance of a third cut [6][11]. - The next interest rate cut is likely in June, with an 80% chance of a 25-basis-point reduction [11]. Global Economic Indicators - Japan's economy showed minimal growth, with an annualized expansion of only 0.2% last quarter, which has implications for potential government stimulus [7][11]. - Minutes from the Reserve Bank of Australia's board meeting indicated concerns over inflation and employment risks shifting materially [9][11]. Cryptocurrency Market - Bitcoin experienced a slight increase of 0.05% to $68,881.72, while ether remained stable at $1,999.11 [9].

Group 1: Japan's Economic Context - The yen has strengthened since the election, currently trading at 153, indicating a shift in market sentiment [1] - There is a narrative suggesting a turning point for Japan's economy, with a pro-growth outlook and certainty in policy implementation, leading to a belief that the yen is undervalued [2] - Despite the positive sentiment, fundamental bearish reasons for the yen remain, including slow economic growth and a large debt burden with negative real yields [4] Group 2: Dollar Dynamics - The dollar's reaction to strong payroll numbers was less pronounced than expected, indicating a complex relationship between economic data and currency movements [6] - The market is structurally overexposed to the dollar, which is expected to trend downwards over the coming years, with opportunities to offload during spikes [7] - Weak economic data could justify rate cuts, further weakening the dollar, while strong data may not provide relief due to poor monetary policy [8] Group 3: Market Sentiment and Equity Outlook - There is a sense of anxiety in the market, particularly regarding potential shocks in equity due to ongoing portfolio damage and wealth concerns [10] - The impact of AI on job recovery is viewed as slower than some predictions, suggesting a longer timeline for significant changes in the job market [11]

Could the dollar's days be numbered? Probably not, but we may be approaching an era of currency multipolarity. Recently, a speech by President Xi Jinping, in which he directly called for establishing the renminbi as a global reserveMarkets rise and fall, booms come and go, and the world keeps ticking. Ultimately, I believe observing megatrends, as difficult as they can be to spot, let alone fully comprehend, can yield insights into the advance of human society, which in turn could pave the way for many usef ...

Federal Reserve governor Stephen Miran said the dollar would need to register a steeper fall than it already has to affect inflation, and that he does not view the dollar's weakness as having material consequences on monetary policy so far. ...

Group 1: Dollar Index and Labor Market - The dollar index rose to a 1.5-week high, finishing up by +0.23%, driven by a stock selloff that increased liquidity demand for the dollar [1] - Challenger's January job cuts rose by +117.8% year-over-year to 108,435, marking the largest amount of job cuts for a January since 2009 [2] - Weekly initial unemployment claims increased by +22,000 to an 8-week high of 231,000, indicating a weaker labor market than the expected 212,000 [2] Group 2: Federal Reserve and Interest Rates - Fed Governor Lisa Cook's hawkish comments suggested risks are tilted toward higher inflation, supporting the dollar despite signs of labor market weakness [1] - The FOMC is expected to cut interest rates by about -50 basis points in 2026, while the Bank of Japan (BOJ) is anticipated to raise rates by +25 basis points in the same year [4] - Swaps markets are pricing in a 23% chance of a -25 basis point rate cut at the next policy meeting on March 17-18 [3] Group 3: Eurozone Economic Indicators - The euro fell by -0.14% as it gave up an early advance due to a stronger dollar, despite the ECB keeping interest rates unchanged [5] - Eurozone December retail sales fell more than expected, while German December factory orders unexpectedly rose, presenting mixed economic signals for the euro [5]

The dollar index (DXY00) rose to a 1.5-week high today and is up by +0.12%.  Today's stock selloff has boosted liquidity demand for the dollar.  Also, hawkish comments from Fed Governor Lisa Cook supported the dollar when she said she now sees "risks as tilted toward higher inflation." The dollar fell back from its best levels on signs of weakness in the US labor market after Challenger's January job cuts posted their biggest decline for a January since 2009, weekly jobless claims rose more than expected ...

Group 1 - The dollar index rose by +0.19% following the end of the partial US government shutdown and a deal signed by President Trump to fund the government [1] - Weakness in stocks increased liquidity demand for the dollar, while yen weakness supported the dollar as it fell to a 1.5-week low [1] - The dollar's gains were limited by the January ADP report, which showed fewer jobs added than expected, indicating a dovish factor for Fed policy [2][3] Group 2 - The January ISM services index remained unchanged at 53.8, which was stronger than the expected decline to 53.5, with the prices paid sub-index rising to 66.6 [4] - The dollar faced pressure as foreign investors withdrew capital from the US due to a growing budget deficit and political polarization [5] - The markets are currently pricing in a 10% chance of a -25 basis point rate cut at the next policy meeting on March 17-18 [5]

The dollar index (DXY00) today is up by +0.09%.  The dollar is slightly higher today, following the end of the partial US government shutdown after President Trump late Tuesday signed a deal to fund the government.  Also, weakness in stocks today has boosted some liquidity demand for the dollar.  In addition, yen weakness is supportive of the dollar after the yen fell to a 1.5-week low today.  The dollar maintained modest gains on the stronger-than-expected Jan ISM services index. Gains in the dollar are ...

Core Viewpoint - The recent significant rally of the Indian rupee, the largest in seven years, may provide the Reserve Bank of India (RBI) with the opportunity to rebuild its foreign-exchange reserves, although this could limit further gains following the India-US trade deal [1]. Group 1: Market Predictions and Strategies - Barclays Bank Plc and Nomura Holdings Inc. predict that the RBI will utilize the rupee's recovery to purchase dollars, with Nomura forecasting the rupee to reach 94 to a dollar by May, while Barclays aims for the same level through a three-month offshore position [2]. - Barclays advises clients to tactically short the rupee, anticipating that the current rally will not be sustainable and that equity outflows will not fully reverse [9]. - MUFG Bank Ltd. recommends clients to build long dollar/rupee positions in the medium term [9]. Group 2: RBI's Intervention and Market Dynamics - The rupee experienced a slight decline of 0.1% to 90.40 against the dollar, following a 1.4% increase attributed to a US tariff cut, which helped it recover from being Asia's worst performer last month to the region's top gainer [3]. - The RBI has a significant negative short forwards book of $62.4 billion as of December, indicating a need to repay these dollars, which contributed to the rupee's underperformance in the second quarter of 2025 [5]. - The RBI sold a net $49.5 billion in dollars in 2025 to support the rupee, while forex reserves reached a record $709 billion, aided by a weaker dollar, rising gold prices, and RBI's forex swaps [6]. Group 3: Future Outlook and Analyst Opinions - Analysts at Societe Generale predict the rupee could strengthen to 87-88 in the coming weeks, while HSBC forecasts a move to 88 by the end of March [10]. - Standard Chartered Plc suggests that while the RBI may eventually rebuild reserves, it seems unlikely at current levels, with HSBC expecting the central bank to allow the rupee to recover in the March quarter before rebuilding reserves [7]. - The RBI's recent interventions have aimed to buy rupees as the currency tested lows, with officials stating that the exchange rate is market-determined and their role is to ensure orderly movements and curb excess volatility [8].

Economic Outlook - The US economic outlook is improving as uncertainty fades, but risks remain, particularly with hiring concentrated in a few sectors and inflation above the Fed's goal [2] - Markets are discounting a 9% chance for a -25 basis point rate cut at the next policy meeting on March 17-18 [1] Dollar Performance - The dollar fell to a 4-year low following President Trump's comments on its weakness, compounded by foreign capital outflows due to a growing budget deficit and political polarization [1] - The dollar index (DXY) decreased by -0.21%, influenced by a stronger Chinese yuan and higher T-note yields that weakened the dollar's interest rate differentials [6] - The dollar's losses were somewhat contained due to increased liquidity demand from a stock sell-off and supportive comments from Richmond Fed President Tom Barkin regarding the economic outlook [5] Government Shutdown Impact - The partial US government shutdown, now in its fourth day, negatively impacts the dollar, although it is expected to be brief as a spending bill vote is anticipated [3][13] - President Trump announced a tentative deal with Senate Democrats to fund the Homeland Security Department for two weeks, allowing more time for immigration talks [3] Precious Metals Market - Precious metals are experiencing increased demand as a safe-haven asset amid geopolitical risks and US political uncertainty, with a notable rise in gold and silver prices [10][11] - Central bank demand for gold remains strong, with China's PBOC increasing its reserves by +30,000 ounces to 74.15 million troy ounces in December, marking the fourteenth consecutive month of increases [16] - Fund demand for precious metals is robust, with gold ETF holdings reaching a 3.5-year high, although silver ETF holdings have seen some liquidation recently [17]