Forex News
Silver prices experienced a historic drop of nearly 30% as markets reacted to the leadership of Kevin Warsh at the Federal Reserve. The report, authored by Michael Wan, Senior Currency Analyst at MUFG, notes that this decline was part of a broader trend affecting various commodities, including Gold and Copper. The analysis suggests that while the Dollar strengthens, Asian currencies may see some support moving forward.
Historic drop in silver prices
"In particular, silver prices fell sharply by close to 30% in a move for the history books, while gold, copper and several other commodities also fell meaningfully."
"Whether he can coalesce his Fed colleagues both into doing so and also other key beliefs such as reducing the size of the Fed's balance sheet remains to be seen."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The Indian Rupee rises against the US Dollar at the open after the RBI’s intervention.
- The Indian equity market fell sharply on Sunday after the government announced the FY 2026-27 fiscal budget.
- Warsh’s selection as the Fed’s new Chairman has strengthened the US Dollar.
The Indian Rupee (INR) gains against the US Dollar (USD) in the opening session on Monday, following the fiscal budget Financial Year (FY) 2026-27 announcement by the Indian government on Sunday. The USD/INR pair declines to near 91.85 as the Reserve Bank of India (RBI) has intervened in the spot and Non-Deliverable Forward (NDF) markets to provide a cushion to the Indian Rupee near its lifetime lows against the US Dollar.
According to a report from Reuters, traders say that the Indian central bank likely intervened before the local spot market opened on Monday to help the currency stave off a fall to near record low levels.
Meanwhile, Indian stock markets trade slightly higher after a subdued opening on Monday, striving to regain ground after crashing the previous day. Indian bourses fell like a house of cards on Sunday after the annual budget announcement in which the government surprisingly raised Securities Transaction Tax (STT) on trading in the Futures and Options (F&O) segment in the derivative market to extend its grip on curbing speculative activities.
Other major highlights of the fiscal budget were 22% increase in the defence budget to modernize defence equipment, 9% rise in capital expenditure to ₹12.2 lakh crore, tax holidays for global companies to produce data centers in India till 2047, an increase in outlay of Rs. 40,000 Crore to boost the manufacturing of electronic components, and the launch of the Semiconductor Mission 2.0.
Going forward, the major trigger for the Indian Rupee will be the monetary policy announcement by the RBI on Friday. In the December policy meeting, the Indian central bank slashed the Repo Rate by 25 basis points (bps) to 5.25%, and announced a fresh liquidity infusion of ₹1.5 lakh crore to boost credit flow.
The table below shows the percentage change of Indian Rupee (INR) against listed major currencies today. Indian Rupee was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | 0.00% | -0.06% | 0.27% | 0.47% | -0.20% | -0.07% | |
| EUR | 0.05% | 0.06% | -0.02% | 0.33% | 0.52% | -0.12% | -0.02% | |
| GBP | -0.01% | -0.06% | -0.06% | 0.27% | 0.46% | -0.21% | -0.07% | |
| JPY | 0.06% | 0.02% | 0.06% | 0.34% | 0.53% | -0.10% | -0.01% | |
| CAD | -0.27% | -0.33% | -0.27% | -0.34% | 0.19% | -0.47% | -0.35% | |
| AUD | -0.47% | -0.52% | -0.46% | -0.53% | -0.19% | -0.66% | -0.54% | |
| INR | 0.20% | 0.12% | 0.21% | 0.10% | 0.47% | 0.66% | 0.10% | |
| CHF | 0.07% | 0.02% | 0.07% | 0.00% | 0.35% | 0.54% | -0.10% |
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 Indian Rupee from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent INR (base)/USD (quote).
Daily Digest Market Movers: Investors await US NFP data for January
- RBI’s surprise intervention has supported the Indian Rupee to counter the firm US Dollar. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto Friday’s gains near 97.33.
- The US Dollar gained sharply on Friday after the White House nominated former Federal Reserve (Fed) Governor Kevin Warsh as the successor of current Chairman Jerome Powell. Investors took Warsh’s appointment as favorable for the US Dollar, given his historical preference for a strong US Dollar in his prior term at the Fed.
- While investors think Warsh will be inclined to cut rates as United States (US) President Donald Trump already said that the *new Chairman will support bigger cuts, they expect him to rein in the Fed’s balance sheet, which is typically supportive for the dollar as it reduces the money supply in the market, Reuters reported.
- A higher US Dollar has resulted in a sharp decline in the appeal of precious metals, which had rallied significantly in recent months on expectations that Trump’s new candidate will dampen the Fed’s autonomous character.
- For near-term cues on the Fed’s monetary policy outlook, investors await a slew of employment-related economic data, especially the Nonfarm Payrolls (NFP) report for January, which will be released on Friday.
- In Monday’s session, investors will focus on the ISM Manufacturing Purchasing Managers’ Index (PMI) data for January, which will be published at 15:00 GMT. Economists expect the manufacturing sector activity to have contracted again, but at a moderate pace. A figure below 50.0 is considered a contraction in the business activity. The ISM Manufacturing PMI is seen higher at 48.3 from 47.9 in December.
Technical Analysis: USD/INR sees immediate support near 91.50
USD/INR trades lower at around 91.8550 at the time of writing. The pair holds firm above the rising 20-day EMA at 91.2697, keeping the short-term uptrend intact. The average continues to ascend, pointing to sustained buying pressure and favoring dips to be bought.
RSI at 65 (positive) has cooled from recent overbought readings, yet remains above the midline to validate bullish momentum. Continuation could see the advance extend, while pullbacks would find initial support at the rising average. A daily close beneath it would open room for a deeper correction.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
RBI Interest Rate Decision (Repo Rate)
The RBI Interest Rate Decision is announced by the Reserve Bank of India. If the bank is hawkish about the inflationary outlook of the economy and rises the interest rates, it is seen as positive, or bullish, for the INR, while a dovish outlook for the economy (or a rate cut) is seen as negative, or bearish, for the currency.
Read more.Next release: Fri Feb 06, 2026 04:30
Frequency: Irregular
Consensus: 5.25%
Previous: 5.25%
Source: Reserve Bank of India
- Gold faces some selling pressure in Monday’s early European session.
- Reports that Kevin Warsh would be nominated as the next Fed chair weigh on the Gold price.
- Geopolitical risks and sustained buying by central banks might cap the downside for XAU/USD.
Gold price (XAU/USD) slumps to a three-week low below $4,550 during the early European trading hours on Monday, pressured by some profit-taking. The precious metal extends the decline after reaching historic highs last week amid signs of political stability in the United States (US) as Kevin Warsh was selected to be the next Fed chair, easing concerns over the US central bank’s independence.
On the other hand, ongoing geopolitical tensions, including US-Iran tensions, could underpin traditional safe-haven assets such as Gold. Traders will closely monitor the developments surrounding US-Iran negotiations, along with further clarity on Warsh’s policy direction. Additionally, rising demand from major central banks might contribute to the precious metal’s upside.
The US ISM Manufacturing Purchasing Managers Index (PMI) data will be released later on Monday. The figure is expected to improve to 48.3 in January from 47.9 in December. If the report shows surprise to the downside, this could drag the US Dollar (USD) lower and lift the USD-denominated commodity price, as a weaker USD makes greenback-priced gold more attractive for foreign buyers.
Daily Digest Market Movers: Gold remains under pressure after historic plunge
- Trump said over the weekend that the US will "hopefully" make a deal with Iran. Meanwhile, Iranian Supreme Leader Ayatollah Ali Khamenei warned that any attack on his country would spark a regional conflict, as the US continues to build up its forces nearby.
- "Investors and global central banks have... favored gold as their reserve currency of choice, which they believe insulates them from US policy dependence," said Emma Wall, chief investment strategist at Hargreaves Lansdown. "Certain nations will have observed the threat of Russia having its US dollar assets seized by global players supportive of Ukraine, and subsequently considered the metal a more attractive neutral reserve," she added.
- US President Donald Trump nominated Kevin Warsh to succeed Jerome Powell as the next Fed Chair. He is scheduled to take office in May 2026.
- The US Producer Price Index (PPI) climbed 3.0% year-over-year (YoY) in December, beating estimates of 2.7%, according to the Bureau of Labor Statistics on Friday. The PPI rose 0.5% month-over-month (MoM) in December, above the market consensus and the previous reading of 0.2%.
- Hotter-than-expected US producer price inflation could further strengthen the case for the Fed to hold rates steady while policymakers monitor how inflation trends.
- Markets see nearly an 87% chance of interest rates staying at the current 3.50%–3.75% range, with the first 25-basis-point (bps) reduction likely in June.
Gold keeps a bullish vibe in the longer term, but a neutral RSI warrants caution for bulls
Gold trades in negative territory on the day. However, in the longer term, the path of least resistance is to the upside, as the yellow metal is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily chart. The Bollinger Bands widen, suggesting a strong trend continuation.
Despite the bullish trend, the 14-day Relative Strength Index (RSI) hovers around the midline, indicating that further consolidation or a temporary sell-off cannot be ruled out.
Green candlesticks and sustained trading above the February 2 high of $4,885 could make another run toward the $5,000 psychological level. The next upside barrier to watch is the January 27 high of $5,182.
On the flip side, the first downside target for Gold is seen at the January 19 low of $4,620. Any follow-through selling below the mentioned level could expose the January 12 low of $4,513. The key contention level emerges at the 100-day EMA of $4,275.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
- AUD/JPY weakens to around 104.05 in Monday’s early European session.
- The RBA interest rate decision will take center stage on Tuesday.
- The cross keeps positive outlook in the medium term, but further downside cannot be ruled out in the near term amid bearish RSI.
- The first upside barrier emerges at 106.48; the initial support level is located at 102.95.
The AUD/JPY cross attracts some sellers near 104.05 during the early European session on Monday. The Japanese Yen (JPY) strengthens against the Australian Dollar (AUD) as the Bank of Japan (BoJ) Summary of Opinions from the January 22-23 meeting revealed growing hawkishness. Board members warned against falling "behind the curve" on inflation and called for timely rate hikes.
All eyes will be on the Reserve Bank of Australia (RBA) interest rate decision on Tuesday. The RBA is likely to raise the Official Cash Rate (OCR) by 25 basis points (bps) to 3.85% at its February meeting. This expectation hike follows a rise in inflation, which saw the Consumer Price Index (CPI) climb to 3.8% in December. If the Australian central bank delivers a hawkish tone or signals multiple hikes, this could boost the Aussie against the JPY in the near term.
Technical Analysis:
In the daily chart, AUD/JPY holds above a rising 100-day EMA, maintaining the medium-term uptrend. A pullback toward this average would test trend support. Spot trades below the lower Bollinger Band at 104.37 as the bands widen, signaling elevated volatility and a stretched downside. RSI at 41.21 sits below the 50 mark, confirming weakening momentum. Recovery could extend toward the middle band at 106.48, while continued pressure risks a retest of the 100-day EMA at 102.95.
Despite the broader bias remaining supported by the 100-day EMA, near-term traction has turned bearish after the break beneath the lower band. Any base above this average would improve the tone. The widening Bollinger Bands point to expanding volatility and could precede a directional move. RSI below 50 suggests rebounds could fade until momentum turns higher.
(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.
- US Dollar Index gains support as caution builds around the Fed’s policy outlook.
- Trump’s nomination of Kevin Warsh as Fed Chair is seen as hawkish, favoring rate cuts but less aggressively than alternatives.
- The Greenback gained as risk sentiment improved after the US Senate advanced a government funding package.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is holding ground after registering more than 1% gains in the previous session and trading near 97.20 during the Asian hours on Tuesday. Traders await the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for January due later in the day.
The US Dollar gains support from growing caution around the Fed’s policy outlook following President Donald Trump’s nomination of Kevin Warsh as Fed Chair, which markets view as a more hawkish choice who would support lower interest rates, though less aggressively than other potential candidates.
Warsh is also expected to rein in the Fed’s balance sheet, potentially shrinking market liquidity. Traders still price in two Fed rate cuts this year under Warsh, even as the Federal Open Market Committee (FOMC) remains split on the pace and scope of easing. Investors now look to Friday’s monthly jobs report for fresh labor market clues.
The Greenback also gained traction as risk sentiment improved after the US Senate reached an agreement to advance a government funding package, thereby averting a shutdown, according to Politico.
US producer-side inflation firmed, moving further away from the Federal Reserve’s 2% target and reinforcing the central bank’s policy stance. US PPI inflation holds steady at 3.0% year-over-year (YoY) in December, unchanged from November and above expectations for a moderation to 2.7%. Core PPI, excluding food and energy, accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.
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.
Gold prices experienced a significant decline, dropping 9% last Friday, marking one of the most extreme single-day moves in years. The sell-off was attributed to forced liquidations and momentum unwinding, reflecting rapid de-risking by systematic traders. Despite this volatility, gold remains up 13.3% year-to-date, note Charlie Lay and Moses Lim from Commerzbank.
Market volatility impacts Gold prices
"Gold and silver collapsed by 9% and 26% respectively last Friday. Silver in particular was down nearly 40% from its recent high to its intraday low last Friday, marking one of the most extreme single-day moves in years."
"The speed and scale of the sell-off reflected forced liquidations and momentum unwinding. The pattern had the hallmarks of rapid de-risking by systematic and model-driven traders i.e. market participants using rules-based algorithms that can accelerate moves once key technical or risk thresholds are triggered, amplifying moves on the way up and down."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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