Forex News
Gold prices fell in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 12,623.95 Indian Rupees (INR) per gram, down compared with the INR 12,787.61 it cost on Monday.
The price for Gold decreased to INR 147,243.60 per tola from INR 149,152.10 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 12,623.95 |
10 Grams | 126,237.50 |
Tola | 147,243.60 |
Troy Ounce | 392,654.10 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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- Asian stocks decline on Tuesday as investors lock in profits following the recent AI-driven rally.
- Mixed US-Iran messages keep geopolitical risk premium in play and further dent the sentiment.
- Firming expectations for a Fed rate hike this year contributes to a generally weaker market tone.
Most Asian equity markets fell on Tuesday, tracking the overnight slump in US technology stocks, prompting investors to take profits following a powerful artificial intelligence-driven rally. South Korea's Kospi Index is down more than 6% after weeks of outsized gains amid sharp declines in heavyweight chipmakers, leading regional losses. Meanwhile, Japan’s Nikkei 225 and Hong Kong’s Hang Seng are down over 1% for the day.
Investors also remained cautious amid uncertainty about the durability of the US-Iran peace deal in the face of disagreements over key issues and mixed messages. US Vice President JD Vance said that Iran agreed to admit nuclear monitors and is prepared to accept extensive weapons inspections as part of ongoing diplomatic efforts. However, Iran's foreign ministry told state media that Tehran had made no new commitments on nuclear inspections.
Moreover, US President Donald Trump said preventing Iran from obtaining a nuclear weapon outweighs the potential economic consequences of a prolonged military action. Meanwhile, Iran's chief negotiator and parliamentary speaker, Mohammad Bagher Ghalibaf, told state media on Tuesday that the Strait of Hormuz will remain under Tehran's administration and would not return to the pre-war status. This keeps geopolitical risk premiums in play.
Markets were also digesting last week’s hawkish Federal Reserve (Fed) meeting, which lifted market bets for an imminent rate hike this year. According to the CME Group's FedWatch Tool, traders are currently pricing in a 70% chance that the US central bank will raise borrowing costs in September and are assigning a 90% probability of a move in December. This further tempers investors' appetite for riskier assets and contributes to the downfall.
Asian stocks FAQs
Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.
Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.
Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.
Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.
- AUD/JPY attracts some sellers near 112.75 in Tuesday’s early European session.
- The cross keeps a mildly bullish vibe, but further consolidation cannot be ruled out with RSI holding below the midline.
- The first upside barrier emerges at 113.40; the initial support level to watch is 112.70.
The AUD/JPY cross trades in negative territory around 112.75 during the early European trading hours on Tuesday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as traders are on high alert for currency intervention from Japanese authorities. Japan’s Chief Cabinet Secretary Minoru Kihara said on Tuesday that he will take appropriate action against the foreign exchange moves if needed.
On the other hand, a hawkish interest rate hold from the Reserve Bank of Australia (RBA) might underpin the Aussie. The Australian central bank decided to leave the Official Cash Rate (OCR) unchanged at 4.35% after its June monetary policy meeting last week. Despite pausing the interest rates, the board members signaled that further rate hikes might be necessary to achieve its goals.
Technical Analysis:
In the daily chart, AUD/JPY retains a mildly constructive bias while it holds above the 100-day Simple Moving Average (SMA) and the lower Bollinger Band, suggesting underlying demand remains in place despite the recent pullback from the highs. The Relative Strength Index (RSI) at 43.6 leans slightly bearish but not oversold, hinting more at consolidation than a decisive reversal as price oscillates within the upper half of its broader Bollinger envelope.
On the topside, initial resistance is aligned with the Bollinger middle band at 113.40, and a sustained break above this area would open the door for a retest of the upper Bollinger Band around 114.78. On the downside, the immediate focus is on the 100-day SMA at 112.20 ahead of the lower Bollinger Band at 112.00, where buyers would be expected to show more interest if the pullback deepens.
(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.
- Silver price may find the primary support at the six-month low of $61.01.
- The 14-day Relative Strength Index at 34.64 indicates that dominant bearish momentum continues to prevail.
- The immediate resistance lies at the nine-day EMA of $66.31.
XAG/USD depreciates over 3% after registering modest gains in the previous day, trading around $63.20 per troy ounce during the Asian hours on Monday. The technical analysis of the daily chart shows that the spot price is remaining within the descending channel pattern, suggesting a prevailing bearish bias.
The XAG/USD pair is extending a bearish phase as spot remains well beneath the nine-day and 50-day Exponential Moving Averages (EMAs). The configuration of both EMAs above the price suggests rallies are likely to meet selling interest. Meanwhile, the 14-day Relative Strength Index (RSI) at 34.64 hovers just above oversold territory, hinting that bearish momentum prevails but could be losing some intensity.
The initial support lies at the six-month low of $61.01, recorded on March 23. Further declines would expose the lower boundary of the descending channel around $57.50.
On the upside, the immediate barrier lies at the nine-day EMA of $66.31, followed by the upper boundary of the descending channel around $69.70. A break above the channel would support the XAG/USD pair to test the 50-day EMA at $72.70. Further advances above the medium-term average would strengthen the bullish bias and support the XAG/USD pair to explore the area around the three-month high of $90.03, reached on March 10.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- Gold comes under renewed selling pressure amid the underlying USD bullish sentiment.
- The USD stands tall near a one-year high amid the Iran uncertainty and the hawkish Fed.
- Traders look to the flash US PMIs for some impetus ahead of the US PCE on Thursday.
Gold (XAU/USD) meets with a fresh supply during the Asian session on Tuesday and slides back below the $4,150 level, reversing a major part of the previous day's move higher amid a bullish US Dollar (USD). Despite positive signals from US-Iran peace talks, widespread skepticism remains toward a final deal. This, along with the US Federal Reserve's (Fed) hawkish tilt, assists the USD in preserving its recent strong gains to the highest level since May 2025, which continues to undermine the precious metal.
Mediators Qatar and Pakistan said on Monday that the first round of negotiations between the US and Iran – aimed at securing a comprehensive agreement to end the ongoing conflict – concluded with encouraging progress. The two mediating countries said in a joint statement following talks in Switzerland that both sides have agreed on a roadmap towards reaching a final deal within 60 days. The US followed through on a key commitment and temporarily lifted sanctions on Iranian oil exports.
Adding to this, the US will mediate another round of talks to end clashes in Lebanon between Iran-backed Hezbollah and Israel. The market optimism, however, remains capped amid conflicting US-Iran messages. US Vice President JD Vance said that Iran agreed to admit nuclear monitors and is prepared to accept extensive weapons inspections as part of ongoing diplomatic efforts. However, Iran's foreign ministry told state media that Tehran had made no new commitments on nuclear inspections.
Meanwhile, US President Donald Trump said preventing Iran from obtaining a nuclear weapon outweighs the potential economic consequences of prolonged military action. Moreover, Iran's chief negotiator and parliamentary speaker, Mohammad Bagher Ghalibaf, told state media on Tuesday that the Strait of Hormuz will remain under Tehran's administration and would not return to the pre-war status. This keeps geopolitical risk premium in play and underpins the safe-haven buck.
On the monetary policy front, the Fed signaled last week that it will need to raise policy rates this year if inflation remains sticky. Furthermore, Chicago Fed President Austan Goolsbee acknowledged that inflation is heading in the wrong direction and running well above the central bank's 2% target. This reaffirms bets that the Fed will raise borrowing costs at least once, either in September or in December, which lends additional support to the buck and weighs on the non-yielding Gold.
Traders now look forward to the release of the flash US PMIs, due later during the North American session. This, along with speeches from influential FOMC members, will drive the USD and provide some impetus to the Gold. The focus, however, remains on the US Personal Consumption Expenditures (PCE) Price Index and the final Q1 GDP print on Thursday. Apart from this, the US-Iran headlines might continue to infuse volatility in the financial markets and produce meaningful trading opportunities.
XAU/USD 4-hour chart
Gold remains vulnerable while below 100-SMA on H4
From a technical perspective, the XAU/USD pair keeps a bearish near-term tone, beneath the 100-period Simple Moving Average (SMA) on the 4-hour chart. However, the Moving Average Convergence Divergence (MACD) indicator (12, 26, 9) has turned marginally positive with the signal line just above zero, hinting at tentative relief. That said, the Relative Strength Index (RSI) at 37.17 remains in weak territory and suggesting that any bounce would still unfold within a corrective context.
On the topside, the 100-period SMA at $4,311.19 is the first meaningful resistance and needs to be reclaimed on a sustained basis to ease immediate downside pressure and open the way for a more constructive recovery phase. Moreover, traders may continue to treat the current zone as a vulnerable consolidation area, with failure to challenge $4,311.19 likely to keep Gold exposed to further pullbacks on the four-hour horizon.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- The Swiss Franc clings to losses near 0.8088 against the US Dollar amid hawkish Fed bets.
- The Fed is highly anticipated to deliver at least one interest rate hike this year.
- Investors await the US S&P Global PMI and Swiss ZEW Survey – Expectations data.
The Swiss Franc (CHF) holds onto Monday’s losses around 0.8088 against the US Dollar (USD) during the Asian trading session on Tuesday. The Swiss Franc pair faces selling pressure due to continued outperformance by the US Dollar amid firm expectations that the Federal Reserve (Fed) will hike interest rates this year.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks higher at around 101.05, the highest level seen in over a year.
According to the CME FedWatch tool, the odds of the Fed hiking interest rates this year are almost 87%.
Hawkish Fed bets have been intensified as the Federal Open Market Committee (FOMC) Economic Projections report, released last week, showed that nine out of 19 policymakers have projected an interest rate hike this year. It appears a sharp turnaround as none of the officials favored a hike this year in March’s Economic Projections report.
For more cues on the United States (US) interest rate outlook, investors await the US Personal Consumption Expenditure Price Index (PCE) data for May, which will be released on Thursday.
In Tuesday’s session, investors will focus on the preliminary US S&P Global PMI data for June. The Services PMI is expected to arrive higher at 51.0 from 50.7 in May.
On the Swiss Franc front, investors await the ZEW Survey – Expectations data for June, which will be released on Wednesday.
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.
- AUD/USD loses ground despite improved Australian preliminary S&P Global PMI data.
- Australia's preliminary June Manufacturing PMI rose to 51.2, while Services PMI climbed to 49.9, signaling economic stabilization.
- The US Dollar holds ground amid a hawkish sentiment surrounding the Fed policy outlook.
AUD/USD extends its losses for the sixth consecutive day, trading around 0.6980 during the Asian hours on Tuesday. The pair remains subdued despite the release of improved preliminary Australian S&P Global Purchasing Managers Index (PMI) data. Traders’ attention is shifted toward domestic inflation and jobs data due later this week.
S&P Global showed on Tuesday that the preliminary reading of Australia's S&P Global Manufacturing PMI rose to 51.2 in June versus 50.7 in the prior. Meanwhile, Services PMI climbed to 49.9 in June from the previous reading of 48.7, while the Composite PMI jumped to 49.8 in June versus 48.7 prior.
The AUD/USD pair falls as the US Dollar (USD) gains on a hawkish sentiment surrounding the Federal Reserve (Fed) policy outlook. The updated economic projections and commentary from Kevin Warsh, presiding over his first meeting as Fed Chair, surprised the market by leaning more hawkish than anticipated. As a result, futures traders have fully priced in a 25-basis-point rate hike for the September meeting, with some pricing in a minor probability of a tightening move as early as next month.
However, the Greenback may struggle amid easing risk aversion attributed to the ongoing peace talks between the US and Iran, which helped ease concerns about inflation. CNBC reported on Tuesday that US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction.
Economic Indicator
S&P Global Manufacturing PMI
The Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging business activity in Australia’s manufacturing sector. The data is derived from surveys of senior executives at private-sector companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Australian Dollar (AUD). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for AUD.
Read more.Last release: Mon Jun 22, 2026 23:00 (Prel)
Frequency: Monthly
Actual: 51.2
Consensus: -
Previous: 50.7
Source: S&P Global
- US Dollar Index remains close to a 13-month high of 101.13.
- The Greenback receives support from a hawkish sentiment surrounding the Fed policy outlook.
- US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, remains steady after registering modest gains in the previous day and is hovering around 101.00 during the Asian hours on Tuesday.
The US Dollar Index remains near a 13-month high of 101.13, reached on June 19, amid a hawkish sentiment surrounding the Federal Reserve (Fed) policy outlook. The US Fed opted to hold its benchmark interest rate steady between 3.50% and 3.75% in June.
However, the updated economic projections and commentary from Kevin Warsh, presiding over his first meeting as Fed Chair, surprised the market by leaning more hawkish than anticipated. As a result, futures traders have fully priced in a 25-basis-point rate hike for the September meeting, with some pricing in a minor probability of a tightening move as early as next month.
The Greenback may face challenges amid easing risk aversion attributed to the ongoing peace talks between the US and Iran, which helped ease concerns about inflation. CNBC reported on Tuesday that US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction.
On Monday, Vice President Vance announced that Iran has agreed to readmit International Atomic Energy Agency (IAEA) inspectors. The optimism was mirrored by Iranian Foreign Minister Abbas Araghchi, who similarly confirmed that the Swiss dialogue has yielded "major progress."
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.
- NZD/USD softens to near 0.5705 in Tuesday’s Asian session.
- Futures traders have priced in a likely Fed rate hike by the end of this year.
- US Vice President hailed ‘great progress’ in US-Iran talks despite ‘threatening’ and ‘whining.’
The NZD/USD pair trades in negative territory for the fifth consecutive day around 0.5705 during the Asian trading hours on Tuesday. The US Dollar (USD) strengthens against the New Zealand Dollar (NZD) on a hawkish tone from the US Federal Reserve (Fed). Traders brace for the preliminary readings of the US S&P Global Purchasing Managers Index (PMI) later on Tuesday.
Traders grapple with rising expectations that the Fed may take more aggressive action to tackle inflation later this year under the leadership of new Chair Kevin Warsh. This, in turn, could provide some support to the Greenback and create a headwind for the pair.
Fed funds futures are pricing nearly an 89% probability of a Fed hike in December, compared with 15.2% chance a week ago, according to the CME Group's FedWatch tool.
On the other hand, the progress of the US-Iran peace deal could boost the riskier assets such as the Kiwi against the USD. Vice President JD Vance said on Monday that negotiations between Washington and Tehran had made “very good progress" but acknowledged there had been “threatening and whining.” This came after Iran said it would close the Strait of Hormuz again because of Israeli strikes on Lebanon.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Japan’s Chief Cabinet Secretary Minoru Kihara said that he will take appropriate action against the foreign exchang (FX) moves if needed, Reuters reported on Tuesday.
Key quotes
Will take appropriate action against FX moves if needed.
No comment on FX.
Market reaction
At the time of writing, USD/JPY is up 0.01% on the day at 161.55.
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.
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