Forex News
Commerzbank’s Charlie Lay highlights that Indian Rupee (INR) has weakened nearly 12% against the US Dollar (USD) over a year, making it Asia’s worst performer, driven by heavy equity outflows and higher Oil import costs. Despite stepped-up FX intervention, tighter Gold import rules and possible tax relief, with sustained high Oil likely to keep INR under pressure.
Rupee under pressure despite interventions
"The two key factors driving INR’s weakness include 1) sustained foreign equity outflows. Foreign investors have withdrawn over USD20bn in the first four months of this year, more than the total in 2025 of USD19bn, and 2) robust USD demand from oil importers facing a higher crude bill. The shift away from discounted Russian crude toward costlier Middle Eastern supplies, under the terms of the US trade deal, has also accentuated higher import cost pressures."
"In response, the authorities have progressively stepped up support for INR. They include direct FX intervention, forcing banks to unwind speculative long-USD positions, and tightening gold import regulations to reduce USD demand."
"Last week, the government raised the gold import tariff to 15% from 6% and capped gold imports at 100kg per license under the advance authorization scheme. There are also considerations of capital gains tax relief for foreign bond investors."
"A durable recovery will likely require a combination of sustained easing in global oil prices, a meaningful reversal in foreign portfolio outflows, and continued confidence in India's macro stability."
"As long as oil prices remain high, INR is expected to remain under pressure and RBI’s stance is likely to be to smooth out excessive weakness and volatility rather than to offset the depreciation pressure altogether."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
UOB’s Quek Ser Leang and Lee Sue Ann note that EUR/USD has dropped to a six-week low near 1.1620, with strong downward momentum keeping risks skewed lower. While intraday moves are seen within a 1.1600–1.1655 range due to oversold conditions, a clear break below 1.1600 would open the way toward 1.1570, with resistance capped around 1.1685.
Oversold Euro still vulnerable to losses
"24-HOUR VIEW: Last Thursday, EUR dropped sharply to a low of 1.1655. When EUR was at 1.1670 in the early Asian session on Friday, we indicated that “strong momentum could lead to EUR breaking below last month’s low near 1.1655.” We also highlighted that “the next support at 1.1630 is probably out of reach for now.” However, EUR fell more than expected to 1.1616. While EUR could continue to weaken, deeply oversold conditions suggest any decline is likely part of a lower range of 1.1600/1.1655. In other words, a continued decline below 1.1600 is unlikely."
"1-3 WEEKS VIEW: We turned negative on EUR last Thursday (14 May, spot at 1.1715). We indicated that EUR “could trade with a downside bias toward 1.1675.” After EUR dropped below 1.1675, we indicated on Friday (15 May, spot at 1.1670) that “given the rapid increase in momentum, we believe there is scope for EUR to drop to 1.1630, potentially testing the significant support at 1.1600.” EUR subsequently dropped to a low of 1.1616. While the decline is oversold, strong downward momentum continues to suggest downside risk for EUR. From here, a clear break below 1.1600 will shift the focus to 1.1570. We will maintain our negative EUR view as long as it holds below the ‘strong resistance’ at 1.1685 (level was at 1.1720 last Friday)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- GBP/USD falls to near 1.3300 as the British Pound faces pressure due to UK political uncertainty and rising gilt yields.
- UK PM Starmer faces a leadership challenge after a major setback in local elections.
- US President Trump’s threats against Iran have renewed geopolitical tensions.
The GBP/USD pair trades lower near 1.3300 in the early European trade at the start of the week, the lowest level seen in over five weeks. The Cable is down as the British Pound faces broader selling pressure due to the combined effects of United Kingdom (UK) political uncertainty, rising gilt yields, and geopolitical tensions.
UK Prime Minister (PM) Keir Starmer faces a leadership challenge from Greater Manchester Mayor Andy Burnham after the defeat of the Labour Party in regional elections.
Concerns over UK PM Starmer’s leadership stemmed after resignations from various ministers. According to analysts at Jefferies, their base case is “one of a managed exit for Starmer and Burnham likely becoming the next PM”.
Fears of a UK leadership change have prompted gilt yields, in hopes that the new leadership would follow a loose fiscal policy. As of writing, 10-year yields on UK government bonds are up almost 3% to near 5.19%, the highest level seen since the sub-prime crisis.
Meanwhile, tensions between the United States (US) and Iran have renewed as President Donald Trump has warned of serious consequences against Tehran, through a post on Truth Social, if it doesn’t reach a deal soon.
GBP/USD technical analysis
GBP/USD trades lower at around 1.3300 as of writing. The pair keeps a bearish near-term tone as it holds below the 20-day Exponential Moving Average (EMA) at 1.3483 after losing its prior uptrend structure.
The Relative Strength Index (RSI) at 36.8 sits just above oversold territory, hinting that while downside pressure persists, the immediate selling impulse is no longer extreme.
On the downside, the next notable support is the former rising trend-line area around 1.3213, where buyers may attempt to slow the decline. A downside move below the upward-sloping trendline would expose the pair towards 1.3100.
Looking up, initial resistance is reinforced by the 20-day EMA at 1.3483, and only a daily close back above this barrier would start to ease the current bearish bias.
(The technical analysis of this story was written with the help of an AI tool.)
UK gilt yields FAQs
UK Gilt Yields measure the annual return an investor can expect from holding UK government bonds, or Gilts. Like other bonds, Gilts pay interest to holders at regular intervals, the ‘coupon’, followed by the full value of the bond at maturity. The coupon is fixed but the Yield varies as it takes into account changes in the bond's price. For example, a Gilt worth 100 Pounds Sterling might have a coupon of 5.0%. If the Gilt's price were to fall to 98 Pounds, the coupon would still be 5.0%, but the Gilt Yield would rise to 5.102% to reflect the decline in price.
Many factors influence Gilt yields, but the main ones are interest rates, the strength of the British economy, the liquidity of the bond market and the value of the Pound Sterling. Rising inflation will generally weaken Gilt prices and lead to higher Gilt yields because Gilts are long-term investments susceptible to inflation, which erodes their value. Higher interest rates impact existing Gilt yields because newly-issued Gilts will carry a higher, more attractive coupon. Liquidity can be a risk when there is a lack of buyers or sellers due to panic or preference for riskier assets.
Probably the most important factor influencing the level of Gilt yields is interest rates. These are set by the Bank of England (BoE) to ensure price stability. Higher interest rates will raise yields and lower the price of Gilts because new Gilts issued will bear a higher, more attractive coupon, reducing demand for older Gilts, which will see a corresponding decline in price.
Inflation is a key factor affecting Gilt yields as it impacts the value of the principal received by the holder at the end of the term, as well as the relative value of the repayments. Higher inflation deteriorates the value of Gilts over time, reflected in a higher yield (lower price). The opposite is true of lower inflation. In rare cases of deflation, a Gilt may rise in price – represented by a negative yield.
Foreign holders of Gilts are exposed to exchange-rate risk since Gilts are denominated in Pound Sterling. If the currency strengthens investors will realize a higher return and vice versa if it weakens. In addition, Gilt yields are highly correlated to the Pound Sterling. This is because yields are a reflection of interest rates and interest rate expectations, a key driver of Pound Sterling. Higher interest rates, raise the coupon on newly-issued Gilts, attracting more global investors. Since they are priced in Pounds, this increases demand for Pound Sterling.
- USD/CAD drifts higher to near 1.3750 in Monday’s early European session.
- Rising US inflation linked to the Middle East conflict reinforced expectations that the Fed could raise rates later this year.
- Trump is set to discuss military options on Iran on Tuesday.
The USD/CAD pair edges higher to around 1.3750 during the early European trading hours on Monday. The US Dollar (USD) extends its upside against the Canadian Dollar (CAD) as traders have largely priced out US interest rate cuts this year, while expectations for a hike have risen.
Hotter-than-expected US inflation data released last week has fueled expectations that the US Federal Reserve (Fed) will keep interest rates elevated. Financial markets are now pricing in nearly a 48.4% probability the US central bank could hike rates by at least 25 basis points (bps) at its December meeting, compared with 14.3% a week ago, according to the CME FedWatch tool.
US President Donald Trump warned that Iran must act "fast" after efforts to end the US-Israeli war with Iran appeared to have stalled. Ongoing tensions between the US and Iran might continue to boost crude oil prices, underpining the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and higher crude oil prices generally have a positive impact on the Canadian Dollar (CAD).
Reuters reported on Monday that Trump is expected to hold a Situation Room meeting on Tuesday with his top national security advisers to discuss the options for military action regarding Iran.
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.
- The Indian Rupee declines further against the US Dollar as oil prices extend their rally.
- FIIs turned out to be net buyers in the Indian stock market in the last two trading days.
- Traders expect the Fed to deliver at least one interest rate hike this year.
The Indian Rupee (INR) extends its over-a-week-long downfall against the US Dollar (USD) at the start of the week. The USD/INR pair explores the uncharted territory and posts a fresh all-time high at 96.33, as a fresh upside move in oil prices has weakened the Indian Rupee further.
As of writing, the WTI Oil price is up almost 2% to near $103.00. Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.
Oil prices rise further amid fears of US-Iran war resumption
Over the weekend, United States (US) President Donald Trump threatened consequences against Iran, through a post on Truth Social, if the nation fails to reach a deal soon.
“For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” Trump wrote.
Negotiations between the US and Iran were stalled before US President Trump’s visit to Beijing, as Trump dismissed Tehran’s counterdemands, calling them “totally unacceptable”. In response, Iran's foreign ministry spokesperson Esmaeil Baghaei said that the proposal to the US was not “excessive”, and Washington continues to have “unreasonable demands”.
Meanwhile, a report from the New York Times (NYT) has shown that the US and Israel are preparing for coordinated attacks against Iran as soon as next week, according to The Times of Israel.
FIIs turn out to be net buyers for second straight day
According to the data published on the NSE, Foreign Institutional Investors (FIIs) remained net buyers in the Indian stock market for the second straight trading day on Friday. Overseas investors infused an investment worth Rs. 1,329.17 crore on Friday. On Thursday, FIIs poured investment worth Rs. 187.46 crore.
Though there seems to be a slight improvement in FIIs’ sentiment towards the Indian equity market, the overall sentiment is still uncertain amid concerns over India Inc.’s earnings projections due to higher oil prices.
Before Thursday, FIIs remained net sellers for seven trading days in a row, and the average selling was Rs. 4,144.01 crore.
US Dollar gains on escalating hawkish Fed bets
The US Dollar (USD) continues to outperform against its currency peers due to growing expectations that the Federal Reserve (Fed) will deliver an interest rate hike this year. According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike this year are 53.7%, while the rest favor the central bank maintaining status quo. This is a sharp turnaround from two interest rate cuts anticipated before the onset of the war.
Traders have priced out dovish Fed bets as oil prices have pushed the US inflation higher. The US Consumer Price Index (CPI) data showed last week that the headline inflation accelerated to 3.8% Year-on-Year (YoY) in April from 3.3% in March.
Going forward, investors will focus on Federal Open Market Committee (FOMC) minutes of the April policy meeting, which will be published on Wednesday.
Technical Analysis: USD/INR posts fresh all-time high above 96
USD/INR jumps to near 96.33 at the start of the week. The pair maintains a clear bullish near-term bias as it holds well above the 20-day Exponential Moving Average (EMA) at 94.93.
The strong advance has pushed the 14-day Relative Strength Index close to the overbought band near 69, suggesting firm upward momentum, though the steep run-up hints that upside could become more constrained if buyers lose intensity.
On the downside, immediate support is 96.00, with a deeper corrective floor emerging at the 20-day EMA around 94.93, where trend-following demand is likely to reappear on dips. As long as USD/INR defends these supports on closing bases, the broader bullish structure remains intact despite growing risks of consolidation after the recent sharp climb. Looking up, the pair could extend its advance towards 97.00.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
- WTI advances as Middle East drone attacks and escalating US-Iran tensions fueled global supply fears.
- UAE officials are investigating a "terrorist" drone strike on the Barakah nuclear plant, asserting their full right to respond.
- Trump plans to meet with security advisers regarding military options against Iran, increasing the risk of a wider conflict.
West Texas Intermediate (WTI) oil price gains ground for the third consecutive day, trading around $102.70 during the Asian hours on Monday. Crude oil prices are rising due to growing fears of a supply shortage, triggered by drone attacks on the United Arab Emirates (UAE) and Saudi Arabia, alongside escalating tensions between the United States (US) and Iran.
UAE officials are investigating a recent drone strike on the Barakah nuclear power plant and have asserted their full right to respond to what they termed a terrorist attack. Meanwhile, Saudi Arabia intercepted three drones entering its airspace from Iraq and warned it would take all necessary operational measures to defend its sovereignty and security, per Reuters.
US President Donald Trump plans to meet with top national security advisers to discuss military options regarding Iran, deepening the risk of a wider conflict. While Trump has warned Tehran that time is running out to reach a new agreement, Iranian media reports indicate that the two sides remain deeply divided, with the US offering no tangible concessions during their negotiations.
Adding further pressure to already tight global oil supplies, the Trump administration has allowed a key waiver permitting India to buy Russian seaborne oil to expire, despite direct appeals from the Indian government for an extension. Furthermore, energy market anxieties remain high after a recent two-day summit between Trump and Chinese President Xi Jinping concluded without any concrete progress toward reopening the vital Strait of Hormuz shipping lane.
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.
- Gold rebounds after touching a fresh low since March 30 earlier this Monday.
- The USD stands firm amid geopolitical risks and might cap gains for the bullion.
- Inflation fears reaffirm Fed hike bets, warranting caution for the XAU/USD bulls.
Gold (XAU/USD) struggles to capitalize on a modest recovery from its lowest level since March 30, around the $4,480 region set during the Asian session on Monday, amid a bearish fundamental backdrop. The US Dollar (USD) buying remains unabated in the wake of persistent geopolitical uncertainties. Furthermore, rising Crude Oil prices fuel inflationary concerns and bolster bets for a more hawkish US Federal Reserve (Fed), which lends additional support to the USD and contributes to keeping a lid on the non-yielding bullion.
In the latest developments surrounding the Middle East crisis, a drone strike caused a fire at the Barakah Nuclear Power Plant in the United Arab Emirates (UAE). Adding to this, Saudi Arabia said that it intercepted three drones launched from Iraq and also warned that it would take the necessary operational measures to respond to any attempt to violate its sovereignty and security. Furthermore, US President Donald Trump warned that Iran must get moving fast toward a deal or face severe consequences. In a post on Truth Social, Trump wrote that the “clock is ticking” and that there “won’t be anything left” if action is not taken soon, adding that “time is of the essence.”
This raises the risk of a further escalation of tensions in the Middle East and dampens hopes for a US-Iran agreement on the back of stalled peace talks, underpinning the USD's reserve currency status. Furthermore, the US blockade of Iranian ports and the effective closure of the Strait of Hormuz pushed crude oil prices to a two-week high, fueling expectations for an interest rate hike by the US central bank in 2026. According to the CME Group's FedWatch Tool, traders are currently pricing in over a 50% chance that the Fed will raise borrowing costs by the end of this year. The outlook remains supportive of elevated US Treasury bond yields, favoring the USD bulls and capping the Gold price.
The aforementioned fundamental backdrop suggests that the path of least resistance for the XAU/USD pair is to the downside. Hence, any further move up is more likely to get sold into and remain capped in the absence of any relevant market-moving macro data from the US on Monday. Moving ahead, the market focus remains glued to the FOMC Minutes on Wednesday, which will be looked for fresh clues about the central bank's policy outlook. Traders this week will also monitor the release of global flash PMIs. Moreover, the incoming geopolitical headlines might continue to inject volatility into financial markets, which, in turn, will drive the USD demand and influence the Gold price.
Meanwhile, discounts in India jumped to a record last week, while strong investment demand for physical bullion keeps Chinese premiums firm over global benchmark prices. This, however, might do little to act as a floor for Gold prices as rising Iran tensions, inflationary concerns, and hawkish Fed bets might continue to support the USD.
XAU/USD daily chart
Gold could attract fresh sellers at higher levels amid bearish setup
Against the backdrop of last week's failure near the 100-day Simple Moving Average (SMA) hurdle, acceptance below the $4,500 psychological mark will suggest that the broader downtrend is gaining momentum. Moreover, the Relative Strength Index (RSI) is near 40, and a negative Moving Average Convergence Divergence (MACD) reading both hint at subdued buying interest. This validates the near-term bearish bias for the Gold price.
Meanwhile, immediate focus stays on the broader support area anchored by the 200-day SMA at $4,352.59, as a sustained break beneath this zone would likely expose gold to deeper corrective losses in the sessions ahead. On the topside, the 100-day SMA at $4,790.55 is the first meaningful resistance that bulls would need to reclaim to ease the current downside pressure.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.10% | 1.75% | 1.46% | 0.53% | 1.24% | 1.69% | 1.13% | |
| EUR | -1.10% | 0.62% | 0.42% | -0.58% | 0.13% | 0.54% | 0.02% | |
| GBP | -1.75% | -0.62% | -0.72% | -1.22% | -0.52% | -0.07% | -0.60% | |
| JPY | -1.46% | -0.42% | 0.72% | -0.98% | -0.24% | 0.21% | -0.30% | |
| CAD | -0.53% | 0.58% | 1.22% | 0.98% | 0.80% | 1.21% | 0.59% | |
| AUD | -1.24% | -0.13% | 0.52% | 0.24% | -0.80% | 0.45% | -0.11% | |
| NZD | -1.69% | -0.54% | 0.07% | -0.21% | -1.21% | -0.45% | -0.56% | |
| CHF | -1.13% | -0.02% | 0.60% | 0.30% | -0.59% | 0.11% | 0.56% |
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).
- USD/JPY attracts follow-through buying for the sixth straight day amid a broadly firmer USD.
- Rising geopolitical tensions and Fed rate hike bets lift the USD to its highest level since April 7.
- Economic concerns due to the Iran conflict counter intervention fears and undermine the JPY.
The USD/JPY pair scales higher for the sixth consecutive day – also marking the seventh day of a positive move in the previous eight – and climbs to a two-and-a-half-week high during the Asian session on Monday. Spot prices now look to build on the momentum above the 159.00 mark and remain well supported by a broadly firmer US Dollar (USD).
The USD Index (DXY), which tracks the Greenback against a basket of currencies, advances to its highest level since April 7 amid rising US-Iran tensions and hawkish US Federal Reserve (Fed) expectations. US President Donald Trump warned Iran that the “clock is ticking” and that there “won’t be anything left” if action is not taken soon, adding that “time is of the essence.” Adding to this, the Times of Israel reported on Saturday that Israel and the US are actively advancing military preparations to potentially resume coordinated attacks against Iran. This keeps geopolitical risks premium in play and continues to underpin the USD's reserve currency status.
Meanwhile, the US-Iran standoff, along with the effective closure of the critical Strait of Hormuz, pushes Crude Oil prices to a two-week high. This revives concerns that the war-driven surge in energy prices will fuel inflationary pressures and force the US Federal Reserve (Fed) to adopt a more hawkish stance. According to the CME Group's FedWatch Tool, traders are now pricing in over a 50% chance that the Fed will raise borrowing costs by the end of this year. The outlook remains supportive of elevated US Treasury bond yields, which turns out to be another factor supporting the Greenback and contributing to the bid tone surrounding the USD/JPY pair.
The Japanese Yen (JPY), on the other hand, is weighed down by concerns about economic risks stemming from the Middle East conflict. However, speculations that Japanese authorities might step in again to prop up the domestic currency might hold back the JPY bears from placing aggressive bets and act as a headwind for the USD/JPY pair. In the absence of any relevant market-moving economic releases, intervention fears warrant some caution before positioning for any further appreciating move.
Japanese Yen Price Last 7 Days
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies last 7 days. Japanese Yen was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.12% | 1.79% | 1.49% | 0.54% | 1.32% | 1.78% | 1.16% | |
| EUR | -1.12% | 0.65% | 0.42% | -0.59% | 0.19% | 0.65% | 0.03% | |
| GBP | -1.79% | -0.65% | -0.74% | -1.26% | -0.48% | -0.00% | -0.62% | |
| JPY | -1.49% | -0.42% | 0.74% | -0.99% | -0.18% | 0.28% | -0.29% | |
| CAD | -0.54% | 0.59% | 1.26% | 0.99% | 0.86% | 1.28% | 0.61% | |
| AUD | -1.32% | -0.19% | 0.48% | 0.18% | -0.86% | 0.46% | -0.15% | |
| NZD | -1.78% | -0.65% | 0.00% | -0.28% | -1.28% | -0.46% | -0.61% | |
| CHF | -1.16% | -0.03% | 0.62% | 0.29% | -0.61% | 0.15% | 0.61% |
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).
- EUR/JPY strengthens to around 184.80 in Monday’s early European session.
- Further consolidation cannot be ruled out as the cross remains under the Bollinger middle band, with neutral RSI momentum.
- The first support level to watch is 184.30; the immediate resistance level is located at 185.30.
The EUR/JPY cross gathers strength to near 184.80, snapping the four-day losing streak during the early European trading hours on Monday. A hawkish tone from the European Central Bank (ECB) provides some support to the Euro (EUR) against the Japanese Yen (JPY).
ECB Governing Council member Yannis Stournaras said over the weekend that a modest ECB interest-rate increase could temper inflation without causing economic damage. Meanwhile, Governing Council member Boris Vujcic stated on Friday that the decision on whether to increase interest rates in June will hinge on incoming information.
Traders will keep an eye on the preliminary reading of Japan’s Gross Domestic Product (GDP) for the first quarter (Q1), which is due later on Tuesday. The Japanese economy is estimated to grow by 0.4% in Q1, compared to 0.3% in the previous reading. Any signs of growth in Japan could help limit the JPY’s losses in the near term.
Technical Analysis:
In the daily chart, EUR/JPY is hovering just under the Bollinger middle band, leaving the short-term tone neutral to slightly capped while it holds beneath this reference level, with additional upside space toward the upper band. The 14-day Relative Strength Index at 47.75 sits near the midline, hinting at a lack of clear directional momentum after the recent pullback.
On the downside, initial support is seen at the 100-day simple moving average (SMA) at 184.30, with a more significant floor emerging near the May 7 low of 183.50 if selling pressure resumes. The next contention level to watch is the lower Bollinger band at 182.85.
On the topside, a daily close above the Bollinger middle band at 185.30 would ease immediate downside pressure and open the way toward the February 9 high of 186.24. The next hurdle emerges at the upper band resistance at 187.78.
(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.
- EUR/USD depreciates as the US Dollar rises on the Fed shifting toward a more aggressive inflation stance.
- Fed officials prioritized controlling inflation, suggesting further interest rate hikes remain necessary if price pressures persist.
- The Euro may rise due to hawkish European Central Bank policy expectations.
EUR/USD remains subdued for the sixth successive day, trading around 1.1620 during the Asian hours on Monday. The pair loses ground as the US Dollar (USD) rises on the US Federal Reserve (Fed) shifting toward a more aggressive policy stance on inflation.
Several Fed officials recently emphasized that controlling inflation is their top priority, even suggesting that further interest rate hikes could be necessary if price pressures persist. Financial markets have sharply increased the likelihood of a December rate hike to nearly 48%, up significantly from just 14% a week prior, according to the CME FedWatch tool.
The Greenback also receives support from increased safe-haven demand amid ongoing geopolitical conflicts. The United States (US) and Iran remain far from an agreement to end weeks of fighting and reopen the critical Strait of Hormuz shipping route.
US President Donald Trump escalated tensions by publicly warning Iran to make progress or face new consequences. Because the Strait remains effectively closed, global oil prices are continuing to climb, which places a heavy economic burden on countries that rely heavily on energy imports. Global investor anxiety is heightened further by warnings from Chinese leader Xi Jinping to President Trump that Taiwan could trigger direct clashes between their two economies.
However, the downside of the EUR/USD pair could be restrained as the Euro (EUR) may gain ground amid hawkish sentiment surrounding the European Central Bank (ECB) policy outlook.
ECB policymakers hinted at an interest rate hike to tame sticky inflation expectations. A Reuters poll suggested that the 85% of economists indicated that the central bank would raise its deposit rate by 25 basis points (bps) to 2.25% in June, up from just over half expecting that before the April meeting.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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