Forex News
- USD/CAD softens to near 1.3600 in Thursday’s early European session.
- Oil prices rise on Strait of Hormuz closure, supporting the commodity-linked Loonie.
- Traders await the US PCE inflation data for January, which will be released on Friday.
The USD/CAD pair trades in negative territory around 1.3600 during the early European trading hours on Thursday. A rise in crude oil prices provides some support to the commodity-linked Canadian Dollar (CAD). The US weekly Initial Jobless Claims report will be released later on Thursday.
The oil market faces volatility after Iran said that the world should be ready for crude at $200 a barrel as its military attacked merchant ships on Wednesday, and vessel traffic through the Strait of Hormuz dwindled to a trickle. Bahrain said early Thursday that Iran has targeted fuel tanks at one of its facilities, while a senior Iraqi port official said two foreign tankers had been hit in its waters, catching fire and leaking oil.
"We should expect ongoing volatility in energy prices," said Rodrigo Catril, a currency strategist at National Australia Bank in Sydney. "The longer that there's no ability to go through, the pressure on prices will continue.”
Persistent geopolitical risks could boost crude oil prices and underpin the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the CAD.
Traders will closely monitor the US Personal Consumption Expenditures (PCE) Price Index report for January, which is due on Friday. The headline PCE is expected to see an increase of 2.9% YoY in February, while core PCE is projected to see a rise of 3.1% during the same period. If the reports show hotter-than-expected outcomes, this could lift the Greenback against the CAD in the near term.
Markets are now pricing in nearly a 99.5% probability that the Federal Reserve (Fed) will hold the interest rates steady at its March policy meeting, according to the CME FedWatch tool.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
UOB strategists Quek Ser Leang and Peter Chia highlight a strong USD/JPY rally to just under 159.00, driven by higher US yields. Intraday, they see scope for a test of 159.45 while warning that deeply overbought conditions make further gains difficult. Over the next few weeks, a break above 159.45 would shift focus to 160.00, with 158.00 as strong support.
Overbought Dollar but upside risk persists
"24-HOUR VIEW: Conditions are deeply overbought, but as long as 158.55 holds (minor support is at 158.75), there is room for USD to test the significant resistance level at 159.45. Given the deeply overbought conditions, a continued rise above this level appears unlikely, and the 160.00 level is also unlikely to come into view."
"1-3 WEEKS VIEW: Upward momentum has improved over the past few days, and from here, if USD breaks above 159.45, the focus will shift to 160.00. Overall, only a breach of 158.00 (‘strong support’ level previously at 157.20) would indicate that the upside risk has faded."
"1-3 MONTHS VIEW: There is a chance for USD/JPY to rise above 159.45; based on the lackluster upward momentum, any further advance is unlikely to threaten the 2024 high of 162.00. (dated 06 Mar 2026, 157.45)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
MUFG’s Senior Currency Analyst Lloyd Chan highlights that Brent Oil has risen above US$90/bbl as supply risks from Iraq and the Strait of Hormuz overshadow the International Energy Agency’s record 400 million barrel emergency reserve release. The report stresses that the scale and pace of the release are small relative to global demand and potential disruption, limiting downside for Oil prices.
IEA release versus Hormuz disruption
"Brent oil prices fluctuated and rose above the US$90/bbl mark, while risk sentiment took some hit, and this came despite the announcement of oil reserves release by the International Energy Agency. Oil prices also rose as reports suggest Iraq’s oil ports have completely stopped operations due to targeting of two tankers within Iraq’s waters."
"In particular, the IEA agreed to discharge 400 million barrels from emergency oil reserves, its largest-ever release, in order to help contain a price spike driven by the Middle East war. For context, this number far exceeds the 183 million barrels that member states released in 2022 after Russia invaded Ukraine."
"The details of the pace of release will be crucial to gauge the market impact, but ultimately the disruption from the Strait of Hormuz is so large that it dwarfs the oil reserve release."
"To put the 400 million barrels in context, it makes up around just 4 days of total daily global demand for oil. In addition, when compared with the Strait of Hormuz where 20% of global seaborn oil passes through daily (~20mn barrels/day), and where there is significant disruption still, it is difficult to replace this longer-term."
"If we assume that the other IEA members follow the US administration’s announced plan to release oil reserves over 120days, this would imply daily flow of 3.3 million barrels a day from the 400 mn barrels release, still not entirely enough to cover the possibly 10-13mn barrels/day shortfall from the Strait of Hormuz (and after accounting for pipelines to divert oil supply away from SoH such as Saudi Arabia’s East West pipeline)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Indian Rupee faces challenges due to hedging demand and foreign portfolio outflows.
- Market sentiment improves as crude prices decline after reports that the IEA may release record oil reserves.
- The US Dollar could regain ground on rising safe-haven demand amid growing uncertainty over the Middle East conflict.
USD/INR moves little as the Indian Rupee (INR) pressure from hedging demand and foreign outflows offsets improved sentiment, boosted by easing oil prices. Oil prices decline after reports that the International Energy Agency (IEA) may release record oil reserves to stabilize markets. Traders may expect an intervention by the Reserve Bank of India (RBI) to cap the downside of the rupee.
Indian equities struggle due to concerns about artificial intelligence’s impact on the country’s IT sector, though the ongoing Middle East war has largely overshadowed these worries.
India’s one-year and two-year OIS rates have climbed more than 45 basis points each since the Israeli–US conflict with Iran began on February 28, while the benchmark 10-year bond yield has risen by a comparatively modest 11 basis points through Monday before trimming part of the increase. At current levels, swap rates are pricing in nearly two rate hikes by the Reserve Bank of India over the next 12 months.
West Texas Intermediate (WTI) crude oil price gave up gains from the previous session, trading around $82.30 per barrel during the Asian hours on Wednesday. However, the downside in oil prices may remain limited due to rising uncertainty surrounding the Iran conflict and shipping disruptions through the crucial Strait of Hormuz.
The IEA’s proposed drawdown would exceed the 182 million barrels released in 2022 following Russia’s invasion of Ukraine. It is worth noting that India relies heavily on oil imports to meet its energy needs and remains highly sensitive to fluctuations in oil prices.
The US Dollar (USD) could regain ground on increased safe-haven demand amid rising uncertainty surrounding the Middle East conflict. US President Donald Trump said late Monday that the Middle East conflict could end soon. However, US officials indicated on Tuesday that military operations were intensifying in Iran, with limited prospects for diplomatic negotiations, Reuters reported.
Traders await key US Consumer Price Index (CPI) data due later in the day. Focus will then shift toward Friday’s Personal Consumption Expenditures (PCE) Price Index data. These figures may offer fresh signals on the Federal Reserve’s policy outlook.
Technical Analysis: USD/INR remains above nine-day EMA near 92.00
USD/INR trades around 92.30 at the time of writing, slightly below the previous close. The technical analysis of the daily chart indicates a persistent bullish bias as the pair remains within the ascending channel pattern.
The USD/INR pair holds a clear bullish near-term bias as price consolidates near recent highs above the rising 50-day Exponential Moving Average, while the nine-day EMA tracks just below spot and underpins the latest upswing. Momentum remains positive with the 14-day Relative Strength Index (RSI) hovering in the mid-60s, staying below overbought territory after failing to break higher, which signals persistent but moderated buying pressure rather than exhaustion at current levels.
Immediate resistance is seen at the ascending channel’s upper boundary near the all-time high of 92.81. On the downside, initial support appears at the nine-day EMA at 92.06, followed by the channel’s lower boundary near 91.30.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | INR | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.23% | -0.26% | 0.00% | -0.18% | -0.74% | -0.25% | -0.08% | |
| EUR | 0.23% | -0.02% | 0.22% | 0.06% | -0.50% | -0.01% | 0.16% | |
| GBP | 0.26% | 0.02% | 0.23% | 0.08% | -0.48% | 0.00% | 0.17% | |
| JPY | 0.00% | -0.22% | -0.23% | -0.18% | -0.74% | -0.27% | -0.09% | |
| CAD | 0.18% | -0.06% | -0.08% | 0.18% | -0.56% | -0.07% | 0.09% | |
| AUD | 0.74% | 0.50% | 0.48% | 0.74% | 0.56% | 0.49% | 0.68% | |
| NZD | 0.25% | 0.01% | -0.01% | 0.27% | 0.07% | -0.49% | 0.19% | |
| INR | 0.08% | -0.16% | -0.17% | 0.09% | -0.09% | -0.68% | -0.19% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
BNY Strategist Geoff Yu says the Swiss National Bank is prepared to intervene in FX markets as safe-haven flows lift the Swiss Franc, but stresses that real effective exchange rate dynamics give the SNB room to tolerate nominal strength. The bank is expected to act tactically, smoothing volatility rather than signalling a broader policy shift.
SNB weighs franc strength and volatility
"On March 2, the Swiss National Bank warned that it was “increasingly prepared to intervene” in FX markets, citing the conflict in the Middle East. The bank appeared to be anticipating rapid currency appreciation and strong safe-haven inflows that could jeopardize price stability."
"Given the franc’s close eurozone trade links, pass-through can be swift which tends to increase the SNB’s tolerance for nominal franc strength. Higher eurozone inflation will raise the euro’s real effective exchange rate (REER) relative to the franc, especially as inflation differentials remain wide, compounding over the past few years."
"This will open up greater SNB tolerance for franc appreciation. We can see that on a nominal basis, the franc is moving toward new highs, though there hasn’t been much movement in the currency’s REER over the past two years."
"We expect the SNB to adopt a more tactical approach at its meeting next week. There is also scope for some unwinding of liabilities, such as buying back bills or not rolling out repurchase agreements."
"We would not rule out any market activity if the nominal move is severe, such as several big figures within a single session. However, such activities should be viewed only in a volatility smoothing context in response to events, rather than carry much policy information for the broader cycle."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Standard Chartered strategist Nicholas Chia now expects the Reserve Bank of Australia to raise the cash rate to 4.10% at the 17 March meeting, reversing a prior call for a hold. The bank still anticipates another hike in Q2, lifting its terminal rate forecast to 4.35%. Firm activity data and rising inflation expectations are seen driving RBA hawkishness.
Rising expectations push RBA hawkish
"Recent activity indicators remain firm and RBA messaging prior to the blackout period has leaned hawkish."
"But what moved the needle for us was the recent upshift in inflation expectations, which we think the RBA has very limited tolerance for. While part of it may be driven by the recent oil price shock, which the RBA may be inclined to look through, the central bank is likely to be wary of any signs of a de-anchoring of short-term inflation expectations."
"We now expect the Reserve Bank of Australia (RBA) to hike the cash rate to 4.10% at the 17 March meeting, having previously expected a rate hold. We see a high likelihood of a split decision by the RBA board, as hawks may prefer to tighten policy more quickly to keep the economy in better balance."
"We tentatively maintain our view for the RBA to raise the cash rate in Q2 to 4.35% (4.10% prior), likely at the May meeting, although we will watch for any visible signs of weakening economic activity from tighter financial conditions."
"We concede that the RBA rate decision on 17 March is likely to be a close call. The key risk to our view is if the RBA decides to hold the cash rate in March and await more economic data, such as quarterly core inflation."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Commerzbank strategists note that Oil and Brent prices extended gains even after the IEA agreed a record emergency release, as markets focus on hostilities around the Strait of Hormuz and potential US policy shifts to boost production. They highlight that traders see the reserve release as a temporary reprieve and remain concerned about supply-side shocks and stagflation risks.
IEA release fails to cap crude
"Crude oil prices rose after three commercial vessels were reportedly struck by projectiles near the Strait of Hormuz."
"Oil prices rose despite the International Energy Agency (IEA) members agreeing to release a record 400 million barrels of emergency oil reserves. This was more than double the 182 million barrels released after the Russian invasion of Ukraine in 2022. Investors interpreted the move as a temporary reprieve rather than a structural solution to the Strait of Hormuz blockade."
"The energy market remained the focal point. President Trump said IEA’s emergency oil release would ease energy price pressures while the US seeks to “finish the job” in its campaign against Iran. However, this failed to calm nervousness in the oil market."
"There were reports that President Trump is preparing to invoke Cold War-era Defense Production Act to clear the way for oil production off the coast of Southern California. US Interior Secretary Doug Burgum said the law is “absolutely” under deliberation to help a Houston-based company drill oil and override state-level permit issues."
"The macro outlook is increasingly shifting toward a stagflationary scenario, where resilient economic data is overshadowed by supply-side shocks."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold drifts lower for the second straight day on Thursday, though it lacks follow-through selling.
- Rising Oil prices revive inflation concerns, lifting US bond yields and the USD, and exerting pressure.
- A further escalation of Middle East tensions limits the downside for the safe-haven precious metal.
Gold (XAU/USD) retains its negative bias heading into the European session on Thursday, though it lacks follow-through selling and holds above the daily swing low. A fresh leg up in Crude Oil prices threatens the inflation outlook and overshadows signs of moderating price growth in the US, dimming hopes for near-term interest rate cuts by the US Federal Reserve (Fed). This assists the US Dollar (USD) to prolong its uptrend for the third day and exerts pressure on the non-yielding yellow metal.
The US Bureau of Labor Statistics reported on Wednesday that the headline Consumer Price Index (CPI) rose 0.2% in February and the yearly rate held steady at 3.1%. Investors, however, remain worried about a surge in inflation amid a further escalation of the military conflict between Israel, US forces and Iran. In fact, Iran’s Islamic Revolutionary Guard Corps (IRGC) said that it launched a joint operation with Lebanon's Hezbollah against targets in Israel, Jordan, and Saudi Arabia. Moreover, reports that two oil tankers were attacked in the northern Persian Gulf near Iraq and Kuwait add to worries about supply disruptions from the Middle East, triggering a rally of over 6% in Crude Oil prices.
The International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned on Monday that a sustained 10% rise in Oil prices for a year would push global inflation by 40 basis points (bps). This might force the US Fed to delay cutting interest rates, which leads to a further rise in the US Treasury bond yields. This, in turn, continues to push the US Treasury bond yields higher, which remains supportive of the bid tone surrounding the USD and is seen driving flows away from the Gold. However, rising geopolitical tensions offer some support to the safe-haven XAU/USD, warranting some caution for aggressive bearish traders before positioning for any further depreciating move.
Traders now look forward to the release of the usual US Weekly Initial Jobless Claims, due later today, for some impetus ahead of the US Personal Consumption Expenditures (PCE) Price Index on Friday. The focus, however, will remain on developments surrounding the US-Israel-Iran war and Oil price dynamics, which would influence the central banks' policy outlook. Apart from this, the broader risk sentiment should contribute to infusing some volatility around the Gold price.
XAU/USD 4-hour chart
Gold defends ascending channel and 200-SMA confluence support
The XAU/USD pair holds above the upward-sloping 200-period Simple Moving Average (SMA) on the 4-hour chart, around $5,083, keeping the broader uptrend intact within the ascending channel. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram has eased from recent highs but remains in positive territory, suggesting momentum is cooling rather than reversing. Moreover, the Relative Strength Index (RSI) hovers just below 50, aligning with a modest upside tilt while signaling a lack of strong directional conviction.
Initial support emerges at the channel floor near $5,116, aligned just above the 200-period SMA, and a break below this area would expose deeper downside toward the $5,080 region. On the topside, immediate resistance stands at $5,200, with a sustained move above this barrier opening the way toward the channel resistance near $5,570. As long as the price holds above $5,116, dips are likely to attract buyers, while rejection below $5,200 would keep XAU/USD confined to a consolidative phase within the broader bullish channel.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- EUR/JPY softens to around 183.55 in Thursday’s early European session.
- Iran escalates attacks on infrastructure and transport networks across the Gulf, boosting the Japanese Yen.
- Bullish tone for the cross remains intact, but further consolidation cannot be ruled out amid neutral RSI momentum.
- The initial support level is located at 183.10; the immediate resistance to watch is 184.90.
The EUR/JPY cross loses ground to near 183.55 during the early European session on Thursday, pressured by safe-haven flows. NBC News reported that Iran has launched its “most intense operation since the beginning of the war,” firing some of its most advanced ballistic missiles toward Tel Aviv and Haifa in Israel. Oman has evacuated all vessels from its key oil export terminal at Mina Al Fahal as a precautionary measure.
Ongoing tensions in the Middle East and fears of a prolonged war could boost the safe-haven flows, supporting the Japanese Yen (JPY) and creating a headwind for the cross.
On the Euro front, the European Central Bank (ECB) policymaker Isabel Schnabel said on Wednesday that new quarterly forecasts will partly incorporate the economic impact of the war in Iran. Meanwhile, ECB Governing Council member Peter Kazimir stated that a rate hike may be closer than thought, and the central bank could act if the war raises inflation expectations.
Traders have increased pricing for ECB rate hikes after hawkish comments from central bank members. Swaps pricing indicates markets expect the ECB to tighten monetary policy faster than previously thought. The European Central Bank is now seen hiking as soon as June, according to LSEG data.
Technical Analysis:
In the daily chart, the near-term bias of EUR/JPY is mildly bullish as price holds well above the rising 100-day exponential moving average near 181.40, keeping the broader uptrend intact despite the recent pause under the upper Bollinger Band. The pair has retreated from the upper band area, but price still rides the upper half of the Bollinger envelope, indicating sustained demand rather than a full loss of momentum. The RSI at 51 shows balanced conditions after unwinding overbought pressures seen in early February, suggesting consolidation within an ongoing upward structure rather than a completed top.
Immediate support emerges at the mid-Bollinger band and recent congestion zone around 183.10, with a break exposing stronger downside protection near 182.10, where the lower band begins to steepen above the 100-day EMA. Below that, the 181.40 region aligns with the long-term average and marks pivotal trend support. On the topside, initial resistance stands near 184.90, defined by the recent upper Bollinger Band cap, followed by the February high in the 185.70 area.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- WTI gains strong positive traction on Thursday amid a further escalation of conflicts in the Middle East.
- Suspected Iranian attacks on oil tankers in the Strait of Hormuz fuel supply worries and lend support.
- The record release of emergency oil reserves and sustained USD buying keep a lid on further upside.
West Texas Intermediate (WTI) Crude Oil prices trim a part of strong intraday gains to the $94.75-$94.80 region on Thursday, though the downside seems limited amid supply disruption fears. The commodity, however, retains positive bias for the third straight day and currently trades below the $93.00 mark, still up over 6% for the day.
As the US-Israeli war on Iran shows no signs of ending, reports of suspected Iranian attacks on oil tankers in the northern Persian Gulf near Iraq and Kuwait fuel concerns about supply disruptions from the key oil-producing region. Moreover, Iran has warned that no crude will pass through the Strait of Hormuz, a critical maritime chokepoint. This turns out to be a key factor that triggers a fresh leg up in Crude Oil prices.
Meanwhile, the International Energy Agency (IEA) announced that its 32 member countries unanimously agreed to make 400 million barrels of Oil from their emergency reserves available to the market. Moreover, the Trump administration plans to release 172 million barrels from the US emergency oil reserve as part of the coordinated effort to ease soaring crude and gasoline prices amid the ongoing Iran war.
This move is intended to limit supply shocks and hold back bulls from placing aggressive bets. Moreover, worries about the war-driven inflationary pressure remain supportive of a further rise in the US Treasury bond yields and assist the US Dollar (USD) to gain some follow-through positive traction for the third straight day. A firmer Greenback further contributes to capping the USD-denominated commodity.
Nevertheless, the aforementioned supportive fundamental backdrop seems tilted in favor of bullish traders and suggests that the path of least resistance for Crude Oil prices is to the upside. Hence, any corrective slide could be seen as a buying opportunity and is more likely to remain cushioned as the market focus remains glued to geopolitical developments.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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