Forex News

Lloyd Chan at MUFG highlights that the Korean Won has outperformed regional peers, helped by a softer Dollar and a resilient semiconductor and AI investment cycle supporting exports and inflows. Despite sharp recent appreciation, he judges the Won still undervalued after years of underperformance, though USD/KRW now looks oversold and vulnerable to near-term consolidation.

Won outperforms but consolidation risk

"The Korean won has outperformed regional peers this month."

"Beyond a softer dollar backdrop, the won is also supported by a resilient semiconductor and AI investment cycle, supporting exports, earnings, and portfolio inflows."

"Importantly, despite the sharp appreciation seen recently, the won remains undervalued after several years of underperformance."

"That said, USD/KRW appears increasingly oversold in the near term and may be vulnerable to consolidation."

"The broader takeaway remains that a less supportive USD environment is creating opportunities for selective Asia FX outperformance, with KRW continuing to stand out as one of the preferred expressions of that theme."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

BNY Mellon’s Geoff Yu reports the Swedish Riksbank left its policy rate at 1.75%, judging the stance well balanced amid stronger growth and inflation but a softer labor market. Underlying inflation is near 2% and summer readings beat forecasts. The bank’s broadly unchanged outlook still allows for a possible rate increase later this year if inflation persists.

Policy steady but tightening risk

"The Swedish Riksbank left its policy rate unchanged at 1.75%, saying the move was well balanced given a mixed backdrop of stronger-than-expected growth and inflation, alongside a weaker labor market and subdued company pricing plans."

"The Riksbank noted that summer inflation came in above its June forecast and that underlying inflation is close to 2%, while measured inflation remains low because of temporary fiscal measures."

"It also highlighted ongoing uncertainty from the Middle East conflict, though the economic impact so far has been smaller than feared."

"The bank said the outlook is broadly unchanged, but a rate increase later this year remains possible if inflation proves more persistent."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Scotiabank strategists Shaun Osborne and Eric Theoret report that EUR/USD gains are being driven mainly by broad US Dollar (USD) weakness, with front-end spreads narrowing since late June and supporting Euro (EUR) fundamentals. Short-term technicals are described as bullish, with a clear break above 1.1625/50 reinforcing prospects for a push into the mid-to-upper 1.17s, and key resistance seen near the 1.1793 retracement level.

Euro advance supported by narrowing spreads

"Solid gains in the EUR this week largely reflect a broadly lower USD. Front-end spreads have narrowed considerably since the end of June, supporting the fundamental improvement in the EUR in recent weeks."

"But that is not the story of the past 24 hours as investors react negatively to US policy decisions. German PPI rose a stronger than expected 1.1% in July."

"Bullish—EUR secured a clear extension through the 1.1625/50 zone which has strengthened the prospect of gains pushing on to the mid/upper-1.17s in the short run."

"The 61.8% retracement of the EUR H1 decline sits at 1.1793. Trend dynamics are EUR-bullish. Support is 1.1600/25."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Gold pulls back after climbing more than 4% on the previous day to a two-and-a-half-month high.
• The US Dollar and Treasury yields recover following Wednesday’s sharp decline.
• XAU/USD struggles below the 200-day Simple Moving Average after briefly rising above it.

Gold (XAU/USD) remains on the back foot during American trading hours on Thursday as US Treasury yields rebound and the US Dollar stabilizes following the previous day’s sharp pullback. At the time of writing, XAU/USD trades around $4,486, easing from an intraday high of $4,527, its highest level since June 2.

The precious metal climbed over 4% on Wednesday after the US Treasury Department announced that it would increase its liquidity-support buybacks for longer-dated government securities. In reaction, the 30-year Treasury yield fell around 9 basis points (bps) to 5.18%, while the benchmark 10-year yield dropped about 5 bps to 4.63%.

The Treasury’s move provided some relief to the bond market after the 30-year yield climbed above 5.30% earlier this week, its highest level since 2007. However, both the 10-year and 30-year yields are up around 6 basis points on Thursday. The buybacks may ease pressure in the short term, but they do not address large fiscal deficits, heavy debt issuance or persistent inflation risks, analysts warn.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, fell below 99.00 on Wednesday to a three-month low. At press time, the index trades around 98.80, recovering from an intraday low of 98.56.

The latest weekly labour-market data offers some support to the Greenback. Initial Jobless Claims fell to 206K, below market expectations of 210K and the previous reading of 212K (revised from 209K).

The recovery in the US Dollar and Treasury yields reduces the appeal of non-yielding Gold, pulling the metal lower from its highest level in more than two months.

Gold also remains sensitive to the Federal Reserve’s (Fed) monetary policy outlook. According to TD Securities, analysts highlight that “the signal of the Treasury looking to support the longer end, alongside a Fed willing to look past higher energy prices, should be enough to support the yellow metal in the near-term.”

However, they caution that the next meaningful advance may take time to emerge, noting that “with the market still pricing in hikes for 2027, the next leg higher for Gold is unlikely to materialize before the broader market becomes more convinced that the Fed remains on hold.”

According to the CME FedWatch Tool, markets price in a 65% chance that the Fed will keep rates unchanged in September, up from 35% a month ago.

Minutes from the Fed’s July meeting, released on Wednesday, showed that many policymakers judged higher interest rates would likely be needed if inflation failed to decline. Some officials also questioned whether financial conditions were restrictive enough to return inflation to the Fed’s 2% target.

Technical Analysis: XAU/USD stalls below the 200-day SMA

On the daily chart, XAU/USD retains a bullish near-term bias as prices hold above the 50-day and 100-day Simple Moving Averages (SMAs) at $4,164 and $4,380, respectively. The metal is now fluctuating near the 200-day SMA at $4,512 after briefly climbing above it.

The Relative Strength Index (RSI) stands near 65, while the Moving Average Convergence Divergence (MACD) histogram remains positive, pointing to firm upside momentum.

A daily close above the 200-day SMA could open the door toward the horizontal resistance at $4,650. On the downside, the 100-day SMA at $4,380 offers initial support, followed by the 50-day SMA at $4,164 and the $4,000 psychological mark.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Commerzbank’s Moses Lim highlights that Bank Indonesia left the BI Rate at 5.75%, balancing inflation, growth and IDR stability after earlier hikes. BI has expanded hedging incentives and CNY clearing to support inflows and FX stability, while keeping SRBI yields from rising further. The bank maintains a 4.9-5.7% GDP forecast and expects another 25bp hike to 6% by year-end if IDR or inflation pressures intensify.

BI balances growth and rupiah stability

"Bank Indonesia (BI) kept the BI Rate at 5.75% for the second consecutive meeting, aligning with market expectations after 100bp of hikes in May and June. The decision reflected BI's need to balance rising inflation concerns, growth support, and IDR stability."

"BI stated the pause “remains consistent with efforts to strengthen the rupiah’s stability against the impact of heightened global volatility caused by the war in the Middle East”. Acting Governor Destry Damayanti noted that rising US Treasury yields could require a stronger future response."

"BI had more scope to stay on hold after USD/IDR stabilised around 17,830, down from the late-July high of 18,110. The improvement reflected better market confidence after President Prabowo’s budget speech, which outlined a 2027 deficit target of 2.4% of GDP and assured that Danantara Sumberdaya Indonesia (DSI) would only monitor prices rather than centralise commodity export activity."

"In FX, USD/IDR fell 0.1% to 17,833 yesterday and remains within its 17,650-18,200 range since early June. IDR remains vulnerable to oil prices and risk sentiment, although one potential equity-related headwind was delayed yesterday. FTSE announced it will defer any Indonesian equity index changes to December."

"FTSE may still cut the weighting of limited free-float stocks in September, but the decision delays risk of a downgrade to frontier market status for now. MSCI will review Indonesia’s market status in November."

"Looking ahead, IDR stability remains BI’s primary policy concern for now. Further tightening is likely if IDR comes under renewed pressure or inflation risks intensify. Therefore, we expect another 25bp hike to 6% by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Ryan McKay and Bart Melek at TD Securities say Gold and broader precious metals are likely to remain comfortable in a higher trading range. While systematic and ETF inflows have slowed and rates ticked up, Treasury support for the long end and a Fed tolerant of higher energy costs underpin near-term Gold. However, further upside may wait on clearer Fed-on-hold conviction.

Precious metals consolidate elevated band

"While the barrage of recent flows from systematic funds, macro discretionary funds, Asian speculators, and ETFs has notably slowed, and interest rates have moved higher again after yesterday's liquidity measures, gold and precious metals are likely to find comfort in this higher range."

"The signal of the Treasury looking to support the longer end, alongside a Fed willing to look past higher energy prices, should be enough to support the yellow metal in the near-term."

"However, with the market still pricing in hikes for 2027, the next leg higher for gold is unlikely to materialize before the broader market becomes more convinced that the Fed remains on hold."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that USD/CAD is under pressure as broad US Dollar (USD) weakness combines with tentative progress on a US-Canada trade deal. Spot is trading below the bank’s fair value estimate around 1.3800, while short-term technicals are described as bearish, with resistance lowered and further losses expected into the 1.35–1.37 range.

Bearish setup favors deeper CAD strength

"Broad dollar weakness and signs of progress on US/Canada trade are combining to drive the CAD higher. Intraday gains are modest but the CAD’s 0.3% rise is second only to the NZD among the major currencies."

"The tentative trade deal with the US appears to give Canada some breaks on certain steel and aluminium tariffs and reduce auto tariffs."

"Details have yet to be finalized and the domestic reception to concessions that the government has made to reach a deal remains to be seen. Spot is trading below our fair value estimate which continues to slide and sits at 1.3800 this morning."

"Bearish—The USD’s sustained push under retracement support at 1.3817 along with the bearish alignment of intraday, daily and weekly DMI oscillators maintains the technical focus on the downside and limits the USD’s rebound potential significantly."

"Resistance drops to 1.3825/50. We continue to look for more USD losses deeper into the 1.35/1.37 range."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Euro eases from a three-month high as the US Dollar stabilises following Wednesday’s sharp selloff.
• US Treasury yields rebound after Wednesday’s steep decline.
• Stronger-than-expected US Jobless Claims offer additional support to the Greenback.

EUR/USD trims part of its earlier gains on Thursday as the US Dollar (USD) stabilises following the previous day’s sharp selloff. At the time of writing, the pair trades around 1.1686 after touching an intraday high of 1.1710, its highest level since May 14.

The Greenback finds support as US Treasury yields rebound following Wednesday’s steep pullback, which was triggered by the US Treasury Department’s announcement of larger liquidity-support buybacks for longer-dated government securities.

DBS Group Research strategist Chang Wei Liang acknowledges the recent bout of Dollar weakness but cautions against extrapolating further downside from the latest US Treasury move. He argues that, “given that the additional buybacks are very small and there is also no change in monetary policy, the USD is more likely to consolidate today rather than track lower,” suggesting the currency may pause rather than extend its recent slide.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 98.76, recovering from an intraday low of 98.56.

Meanwhile, the latest US labour market data provide additional support to the Greenback. Initial Jobless Claims fell to 206K in the week ending August 15, below market expectations of 210K and the upwardly revised previous reading of 212K.

On the monetary policy front, the Federal Reserve (Fed) and European Central Bank (ECB) are expected to take different paths at their meetings next month. The Fed is widely expected to keep interest rates unchanged, while the ECB is seen raising rates for the second time this year.

These differing policy expectations come amid heightened energy-driven inflation risks as the US-Iran stalemate keeps shipping through the Strait of Hormuz restricted.

San Francisco Fed President Mary Daly said on Thursday that “rising bond yields don’t give a signal for policy” and that Fed policy “is in a good place.” She added that “short-term yields show markets understand the Fed’s reaction function,” while stressing that the central bank “really has to focus on achieving its inflation target.”

The US Dollar (USD) has extended its decline following the US Treasury’s unexpected decision to double its long-end bond buybacks, an intervention designed to push down long-term borrowing costs. While the announcement initially triggered a sharp rally in Treasuries and pulled 10-year yields down, market focus has rapidly shifted to fiscal credibility. 

Institutional analysts across MUFG, UBS, and Brown Brothers Harriman (BBH) warn that using debt swaps to cap long-end yields risks signaling official discomfort with rising borrowing costs, leaving the Greenback increasingly vulnerable to downside pressure.

Unscheduled buyback expansion exposes structural US Dollar vulnerability

According to analysts at MUFG, the Treasury's decision to expand buybacks from $2 billion to $4 billion represents a direct attempt to curb rising long-term yields. However, attempting to manage yields without genuine fiscal consolidation risks alienating global investors and opening up multiple pathways for US Dollar depreciation.

Even if the Treasury buy-back plan does contain yields, the US Dollar now remains more vulnerable to the downside on the fact that yields are potentially lower (...) There appears to now be more avenues opening for US Dollar weakness ahead rather than dollar strength.

Yield intervention aims to mitigate Gulf war and tariff pressures

UBS notes that doubling bond purchases helped ease borrowing costs that were exacerbating the US debt service and affordability crisis. Analysts at the bank suggest the policy acts as an intentional countermeasure against market fallout caused by geopolitical conflicts and tariff measures, though policy uncertainty from the Federal Reserve continues to add an underlying risk premium.

Higher yields impact the US affordability crisis and debt service costs, making them a political focus. This policy is to counter the (presumably unintended) consequences for bond markets of other policies like the Gulf war and tariffs.

Managing yields rather than liquidity erodes fiscal credibility

Strategists at BBH explain that while the buyback acts as a debt-management swap financed by short-term bill issuance, its timing sends a troubling signal. Coming shortly after 30-year yields reached their highest levels since 2007, the operation creates a strong perception that the Treasury is intervening to cap long-end borrowing costs rather than simply improving market liquidity.

The timing of the Treasury’s buyback announcement sends a less comfortable message (...) The perception the Treasury is managing yields rather than liquidity undermines US fiscal credibility and is a drag on USD.

Further US Dollar weakness expected ahead

The Treasury’s expanded buyback program has introduced a structural drag on the US Dollar, the banks say. While UBS highlights the immediate relief provided to bond yields and debt affordability, both MUFG and BBH caution that intervening in long-end borrowing costs erodes fiscal credibility and undermines investor demand for US assets, leaving the dollar firmly biased toward further weakness.

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

BNY Mellon’s Geoff Yu highlights comments from RBI Governor Sanjay Malhotra that the central bank’s net-short forward-Dollar position is still very manageable despite large bearish bets to support the Rupee. Malhotra stressed a market-determined exchange rate, data-driven intervention calibration, stronger-than-expected inflows, and diminishing benefits from additional swapped Dollars as sterilization costs rise.

Rupee support as swap costs rise

"The Reserve Bank of India’s net-short forward-dollar position remains “very manageable,” Governor Sanjay Malhotra said, despite the central bank’s large bearish dollar bet built over the past two years to support the rupee."

"He said the exchange rate remains market-determined, while intervention is still aimed at curbing excessive volatility and speculative activity."

"Malhotra defended the early closure of the FCNR(B) swap window as a data-driven calibration, not a policy reversal."

"He also said inflows into India have been stronger than expected and that the RBI expects at least $80bn from recent measures to attract foreign currency, including FCNR(B) deposits, external commercial borrowings, and overseas foreign-currency borrowings."

"He added that each additional swapped dollar offers diminishing benefits, while sterilization costs rise."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)