Forex News
- Gold price falls in Friday’s early European session.
- There was no sign of progress in ceasefire talks between the US and Iran, weighing on the Gold price.
- Traders brace for the US May employment report, which is due later on Friday.
Gold price (XAU/USD) attracts some sellers to near weekly low during the early European session on Friday. The precious metal remains volatile amid ongoing geopolitical turmoil. Traders will closely monitor the developments surrounding the US-Iran peace deal and the US May employment report later on Friday.
Iran’s Foreign Minister Abbas Araghchi said Wednesday that "no tangible progress" has been made in negotiations to end the Middle East war. Araghchi further stated that lines of communication with Washington were still open but warned that any attack by Israel on the Lebanese capital Beirut as part of its campaign against Hezbollah would trigger a "full-scale resumption" of the US-Iran conflict.
While Iran’s Foreign Minister stated that the negotiations had stalled, US President Donald Trump said ceasefire talks are in the “final” stages. On Wednesday, Iran fired missiles and drones at Kuwait and Bahrain, killing one person and injuring dozens at Kuwait’s main airport, after the US struck an oil tanker headed to the Islamic Republic.
A lack of progress in ceasefire talks between the US and Iran after the worst burst of violence in weeks continue to fuel concerns over inflation and expectations of elevated interest rates, which weigh on the Gold price, non-yielding asset.
“Higher inflation expectations, associated with the negative supply shocks, have pushed yields across the curve higher, kept the USD firm, and prompted markets to begin pricing in a Fed hike in late 2026,” said Bart Melek from TD Securities.
The US employment report will take center stage later in the day. The Nonfarm Payrolls (NFP) are expected to show a gain of 85,000 jobs in May, while the Unemployment Rate is projected to remain steady at 4.3% during the same period. Any signs of surprise weakening in the US labour market could undermine the US Dollar (USD) and support the USD-denominated commodity price in the near term.
XAU/USD daily chart
Gold keeps the bearish vibe in near term
In the daily chart, XAU/USD holds in a bearish near-term bias as price sits under the 100-day Moving Average and below the Bollinger Bands middle line, keeping the broader downswing intact. The Relative Strength Index (RSI) at 40 is weak but not oversold, suggesting sellers retain control while still allowing room for further downside before exhaustion signals emerge.
On the topside, initial resistance is located at the Bollinger Bands middle band around $4,545, with the upper band near $4,715 and the 100-day MA at $4,795 forming a wider cap if a rebound extends. On the downside, the first notable support is the lower Bollinger band at roughly $4,370; a clear break beneath this zone would open the door to a deeper retracement, while holding above it would hint at scope for consolidation within the current bearish structure.
(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 Canadian Unemployment Rate is seen holding steady in May.
- The BoC is expected to hold its hand at its June 10 meeting.
- The Canadian Dollar is losing ground vs the Greenback this month.
Statistics Canada will release its Labour Force Survey on Friday, and markets are bracing for quite a steady print. The Unemployment Rate is expected to remain at 6.9% in May, while the Net Change in Employment is forecast to increase by 10K, reversing April’s 17.7K drop.
Despite the report's tone, the bar for the Bank of Canada (BoC) to change its policy direction should remain pretty high. Indeed, the central bank is expected to keep its policy unchanged at its June 10 gathering, following four consecutive ‘on hold’ decisions.
At its latest event, the BoC signalled an upbeat medium-term outlook for economic growth while revising inflation higher for the current year. In addition, Governor Tiff Macklem delivered a cautious message at his press conference, keeping the data-dependent stance well in place while allowing for higher rates if energy prices remain elevated.
So far, market participants expect around 34 basis points of tightening by the central bank by year-end.
What can we expect from the next Canadian jobs report?
Consensus among analysts sees Canada’s Unemployment Rate at 6.9% last month. Additionally, investors forecast the economy will add around 10K jobs in May, surpassing the 17.7K loss recorded in the prior month. It is worth recalling that Average Hourly Wages rose at an annualised 4.8% in April (from 4.7%), pointing to sticky wage inflation.
When is the Canada Unemployment Rate released, and how could it affect USD/CAD?
All eyes in Canada will be on Friday’s release of the jobs report, due at 12:30 GMT. A stronger print could give the Canadian Dollar (CAD) a quick lift, but don’t expect fireworks.
USD/CAD has been on a steady uptrend since the beginning of May, almost entirely to the tune of developments in the Middle East and dynamics around its North American peer.
Pablo Piovano, Senior Analyst at FXStreet, points out that USD/CAD has been edging higher over the last few weeks, hitting fresh two-month tops north of 1.3900 the figure on June 4. The surpass of the latter could prompt spot to embark on a potential trip toward the 2026 ceiling of 1.3966 recorded on March 31. So far, the constructive outlook is expected to remain intact while above the 200-day SMA around 1.3810.
On the other hand, he highlights minor support at the weekly floor of 1.3770 (May 29), seconded by the provisional 55-day and 100-day SMAs at 1.3761 and 1.3719, respectively. Down from here emerges the May bottom at 1.3549 (May 1), closely followed by the March base at 1.3525 (March 9), the February trough at 1.3504 (February 11) and the 2026 valley at 1.3481 (January 30).
“Momentum favours extra gains, with caution,” he adds, noting that the Relative Strength Index (RSI) is flirting with the overbought region past the 69 level, and the Average Directional Index (ADX) just over 25 suggests the underlying trend appears to be gathering traction.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Economic Indicator
Unemployment Rate
The Unemployment Rate, released by Statistics Canada, is the number of unemployed workers divided by the total civilian labor force as a percentage. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease of the figure is seen as bullish for the Canadian Dollar (CAD), while an increase is seen as bearish.
Read more.Last release: Fri May 08, 2026 12:30
Frequency: Monthly
Actual: 6.9%
Consensus: 6.7%
Previous: 6.7%
Source: Statistics Canada
- Nonfarm Payrolls are expected to rise by 85K in May, slowing from the 115K gain seen in April.
- The Unemployment Rate is forecast to hold steady at 4.3%.
- US employment data could influence the Fed policy outlook and ramp up the US Dollar’s volatility.
The United States (US) Bureau of Labor Statistics (BLS) will release the Nonfarm Payrolls (NFP) data for May on Friday at 12:30 GMT.
With Fed policymakers becoming more hawkish as the new Chairman Kevin Warsh takes the helm, investors will scrutinize the underlying details of the employment report to assess whether the Federal Reserve (Fed) will lean toward a tighter policy later in the year.
US payrolls are among the most market-moving indicators. Still, this time, with all eyes on the inflation front, only a dismal print will be able to significantly hit the US Dollar.
What to expect from the Nonfarm Payrolls report?
Investors expect NFP to rise by 85K following the surprisingly strong 185K and 115K increases recorded in March and April, respectively. The Unemployment Rate is seen holding steady at 4.3%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, is projected to soften to 3.4% from 3.6% in April.
Previewing the employment report, TD Securities analysts note that they expect NFP to register its lowest gain in three months at 60K in May.
“Gains will stem from the private sector, as we expect government jobs to be flat. We also anticipate the Unemployment Rate rate will edge higher for a second consecutive month to 4.4% [above the broader consensus of a stable 4.3%], assuming the participation rate stays largely unchanged. Average Hourly Earnings likely picked up 0.3% m/m (3.5% y/y),” they add.
Automatic Data Processing (ADP) reported earlier in the week that employment in the private sector rose by 122K in May. This print followed the 105K (revised from 109K) increase reported in April.
"Hiring was more broad-based in May than we've seen in the last few years. The labor market continues to show sustained momentum going into the summer hiring season," said Nela Richardson, Chief Economist at ADP.
Meanwhile, the Employment Index of the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) improved to 48.6 from 46.4 in April, while the Employment Index of the ISM Services PMI was virtually unchanged at 47.9. Still, with both readings remained in the contraction territory, contradicting the ADP’s findings.
How will the US May Nonfarm Payrolls affect EUR/USD?
The US Dollar (USD) has been benefiting from the risk-averse market environment due to a prolonged crisis in the Middle East. Additionally, growing fears over high energy costs leading to persistently strong inflation have been paving the way for a hawkish Federal Reserve (Fed) policy pricing, further supporting the currency.
After rising about 0.9% in May, the USD Index is up 0.5% so far in June, while markets see a nearly 60% probability of the US central bank raising the policy rate by 25 basis points (bps) at least once by the end of 2026, as per CME FedWatch Tool.
Unless there is a significant downside surprise in the headline NFP print, policymakers are likely to focus on taming inflation without worrying about labor market conditions.
Dallas Fed President Lorie Logan said earlier this week that the labor market is stable and noted that inflation is taking too long to return to 2%. “I am increasingly concerned that higher interest rates could be necessary later this year,” Logan added.
Similarly, New York Fed President John Williams stated that the job market is healthy and upside risks to inflation have increased. Furthermore, Cleveland Fed president Beth Hammack said that the Fed may need to act soon if inflation trends don’t cool and echoed the same sentiment about employment conditions, noting that “job market data point to stability.”
Overall, Fed policymakers are largely tilting toward the hawkish side due to persistent inflation pressures and signs that the labor market is holding up well.
Following two consecutive months of robust readings, a figure above 50K could be seen as a “good enough” growth in NFP. In this scenario, the USD could gather strength heading into the weekend and cause EUR/USD to stretch lower.
At this point, only consecutive dismal NFP figures could sway policymakers’ view about the policy outlook. Hence, even if the NFP data comes in below 50K, any negative impact on the USD could remain short-lived. While EUR/USD could gain traction with the immediate reaction, a steady recovery could be difficult to come by.
In summary, the USD shouldn’t have a hard time staying resilient against its peers in the near future.
A single disappointing NFP print might not be enough to shift the market conviction about a tighter Fed policy. Only a reopening of the Strait of Hormuz, whether by an extended ceasefire or a truce deal between the US and Iran, could trigger a deep correction in crude Oil prices and ease inflation concerns. In this market environment, this seems to be the only possible scenario in which the USD enters a bearish trend and opens the door to a decisive rally in EUR/USD.
Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“EUR/USD’s near-term technical outlook suggests that the bearish bias stays intact but lacks momentum. The Relative Strength Index (RSI) indicator on the daily chart remains slightly below 50 after testing 40 and the pair stays in the lower half of Bollinger Bands, while trading below all key Simple Moving Averages (SMA).”
“On the downside, 1.1580 (Fibonacci 61.8% retracement of the mid-March – Mid-April recovery) aligns as an interim support level before 1.1500 (Fibonacci 78.6% retracement) and 1.1415-1.1400 (static level, March 13 low).”
“Looking north, a strong resistance area could be spotted at the 1.1680-1.1700 region, where the 200-day SMA, 100-day SMA and the Fibonacci 38.2% retracement level align. In case EUR/USD stabilizes above this region, it might be able to attract technical buyers and target 1.1750 (Fibonacci 23.6% retracement) ahead of 1.1800 (static level, round level).”
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- EUR/USD rises as hot Eurozone inflation solidifies market expectations for an ECB rate hike in June.
- The US Dollar stalls as cautious investors await the upcoming Nonfarm Payrolls report for clear market direction.
- Traders turn cautious amid complex, shifting developments regarding a potential US-Iran peace agreement to end recent hostilities.
EUR/USD extends gains for the second successive day, trading around 1.1620 during the Asian hours on Friday. The Euro (EUR) finds support as recent Eurozone inflation data solidified market expectations for a near-certain 25-basis-point rate hike by the European Central Bank (ECB) at its June 11 meeting. Traders are pricing in a total of two or three rate increases for the year.
Eurozone headline inflation climbed to 3.2% in May, marking its highest level in over two and a half years. Furthermore, core inflation accelerated to 2.5%, and services inflation rose to 3.5%, a clear indication that price pressures are broadening significantly beyond the volatile energy sector.
The EUR/USD pair holds losses as the US Dollar (USD) flatlines amid market caution ahead of the upcoming US Nonfarm Payrolls (NFP) report for fresh direction. Present projections indicate that the US economy added 85,000 jobs in May, with the Unemployment Rate expected to hold steady at 4.3%.
Traders adopt caution due to a complex web of developments surrounding a potential US-Iran peace agreement to end recent hostilities. Tensions remain highly elevated following warnings from Iranian Foreign Minister Abbas Araghchi, who declared that the strategic Strait of Hormuz falls within Iranian and Omani territorial waters and asserted that US regional military bases are active targets for retaliation.
US President Donald Trump offered an optimistic outlook early Wednesday, stating that Iran is close to signing a peace framework and that a breakthrough could occur over the weekend. Adding to the regional complexity, Israeli Defense Minister Israel Katz affirmed on Thursday that Israel will sustain military operations in Lebanon despite a ceasefire, preventing displaced residents from returning.
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.
- The Oil price trades calmly near $91.00 even as tensions between Israel and Lebanon linger.
- The IRGC wants Israel to withdraw its troops from occupied areas in Lebanon.
- US President Trump said that negotiations with Iran are in the middle of the final stages of the deal.
West Texas Intermediate (WTI), futures on NYMEX, trades flat at around $91.00 during the early European trading session on Friday. The oil price consolidates even as the United States (US)-brokered ceasefire between Israel and Lebanon is proving to be fragile due to continued attacks between them.
Iran-backed Hezbollah chief Naim Qassem has rejected the ceasefire deal as a “farce”, warning that northern Israel will remain a target for fighters as long as Israel continues to bomb Lebanon, Al Jazeera reported.
On Thursday, Iran’s Islamic Revolutionary Guard Corps (IRGC) stated that the region will never be stable unless “Israel withdraws from occupied areas in Lebanon”.
Renewed conflicts between Israel and Lebanon could escalate uncertainty regarding the US-Iran deal, a scenario that will keep energy supply crisis intact and boost oil prices further.
While there have been no comments from Iran regarding the progress in negotiations with Washington towards a permanent peace deal, US President Donald Trump remains confident that the deal will be finalized soon.
On Thursday, US President Trump said in a post on Truth Social that Washington is “in the middle of my final negotiations to end the war with IRGC”, while criticizing all Democratic and four Republican House members for voting in favor of the war powers resolution.
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.
- AUD/JPY weakens to near 114.00 in Friday’s early European session.
- The constructive outlook of the cross prevails above the 100-day SMA, with bullish RSI momentum.
- The immediate resistance emerges at 114.80; the initial support is seen at 114.00.
The AUD/JPY cross loses traction to around 114.00 during the early European session on Friday. Fears of currency intervention from Japanese authorities provide some support to the Japanese Yen (JPY) against the Australian Dollar (AUD). Japan’s Finance Minister Satsuki Katayama said on Friday that the authorities are always ready to react suitably as needed on foreign exchange.
On the other hand, a hawkish tone from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. RBA Governor Michele Bullock on Thursday emphasized that the central bank remains strictly focused on curbing inflation, following three interest rate hikes earlier this year that pushed the cash rate to 4.35%. Bullock further stated that inflation is too high, and the board will do what it considers necessary to achieve our mandate to deliver price stability and full employment.
Technical Analysis:
In the daily chart, AUD/JPY retains a bullish near-term bias as it holds well above the 100-day simple moving average (SMA), keeping the broader uptrend intact despite the latest consolidation. Price is now pressing into the Bollinger band midline resistance at, with the upper band higher limiting topside extension for now. The Relative Strength Index (14) around 52 is broadly neutral, hinting that momentum has cooled but not reversed, allowing for further gains if resistance levels give way.
On the topside, immediate resistance is located at the upper Bollinger band resistance at 114.80 and a daily close above this barrier would open the door toward the 115.00 psychological level. On the downside, initial intraday support is seen around the current price area near 114.00, ahead of a stronger Bollinger band floor at 113.20; a deeper pullback would expose the 100-day SMA at 111.55, where buyers are likely to defend the broader bullish structure.
(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.
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