Forex News
- EUR/CAD rose as lower global bond yields supported the Euro and softer crude oil prices dragged down CAD.
- Escalating French debt, reaching 119% of GDP, pushed 10-year French bond yields to 4.96%, a multi-decade high.
- Traders are awaiting the Eurozone preliminary September HICP inflation report for further monetary policy cues.
EUR/CAD rises after posting modest losses in the previous day, trading around 1.6010 during the early European hours on Friday. Traders are turning their attention to the upcoming preliminary Eurozone Harmonized Index of Consumer Prices (HICP) data for September, set to be released later in the day.
Meanwhile, the EUR/CAD cross is advancing as a broader retreat in global bond yields helps bolster overall market sentiment, providing underlying support to the shared currency. However, gains in the Euro (EUR) remain constrained by worsening fiscal troubles in France. According to an Associated Press report, French public debt has ballooned to 119% of GDP, driving the country's 10-year government bond yield up to 4.96%, its highest level since August 2002.
In response to the escalating crisis, French Finance Minister Roland Lescure pledged to restore fiscal discipline, aiming to narrow the budget deficit to 5% next year before bringing it down to the European Union's 3% ceiling by 2029.
France’s new budget bill tests market nerves and political resolve
Analysts at Rabobank note that France is set to unveil its latest budget plan, with policymakers “hoping to lower its budget deficit and soothe unease in the bond market.” They highlight that “both tax hikes and spending cuts have been mooted” as Paris seeks to reassure investors against a backdrop of elevated debt levels and heavy issuance. Rabobank also reminds that a “difficult passage for the budget brought down the government last year,” underscoring the political sensitivity around fiscal consolidation and the potential for renewed market focus on French risk.
Concurrently, the EUR/CAD pair is drawing strength from weakness in the Canadian Dollar, which is being weighed down by falling crude oil prices as Middle Eastern supply flows gradually return to pre-war levels. Despite this temporary stabilization in supply, investors remain cautious about whether the recovery is sustainable without a formal peace agreement, particularly following recent attacks on tankers in the Strait of Hormuz and repeated strikes on regional refineries.
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.
- GBP/JPY trades flat at around 208.55 as both trades firmly.
- Tokyo CPI ex. Fresh Food arrives at 2.7% YoY, higher than 2.4% estimates.
- BoE’s Mann criticizes central bank for being late on countering Iran war-led inflation.
The British Pound (GBP) consolidates against the Japanese Yen (JPY), which is outperforming its currency peers on Friday. At press time, GBP/JPY is flat at around 208.55.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.09% | -0.13% | 0.01% | -0.08% | -0.10% | -0.20% | |
| EUR | 0.09% | 0.00% | -0.04% | 0.08% | 0.04% | 0.00% | -0.10% | |
| GBP | 0.09% | -0.00% | -0.04% | 0.07% | 0.02% | -0.00% | -0.10% | |
| JPY | 0.13% | 0.04% | 0.04% | 0.15% | 0.05% | 0.03% | -0.06% | |
| CAD | -0.01% | -0.08% | -0.07% | -0.15% | -0.10% | -0.13% | -0.22% | |
| AUD | 0.08% | -0.04% | -0.02% | -0.05% | 0.10% | -0.03% | -0.11% | |
| NZD | 0.10% | -0.01% | 0.00% | -0.03% | 0.13% | 0.03% | -0.08% | |
| CHF | 0.20% | 0.10% | 0.10% | 0.06% | 0.22% | 0.11% | 0.08% |
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).
The Japanese currency outperforms as Tokyo Consumer Price Index (CPI) data for September has come in stronger-than-expected, which might reinforce the expectations of more interest rate hikes by the Bank of Japan (BoJ) in the near term.
Tokyo CPI report showed earlier in the day that inflation ex. Fresh Food accelerated to 2.7% Year-on-Year (YoY) from 1.8% in August. The data was expected to arrive at 2.4%.
BoJ’s Summary of Opinions (SoP) of the September policy meeting also showed on Thursday that a majority of officials argued in favor of accelerating the monetary tightening pace. However, remarks from Japan Cabinet Office representatives at the BoJ board that the central bank should exercise caution on the rate-tightening pace could be a hurdle for the narrative.
Brown Brothers Harriman’s (BBH) Elias Haddad notes that the latest BoJ Summary of Opinions was “hawkish on direction but generally cautious on the pace,” underscoring a reluctance to accelerate normalization. He adds that the Cabinet Office’s call for policymakers “to examine carefully the cumulative effects of past policy interest rate hikes” further “adds resistance to a faster hiking cycle,” reinforcing the view that any shift toward tighter policy is likely to remain gradual and limiting near-term upside for the Japanese Yen.
On the British Pound front, Bank of England (BoE) member Catherine Mann, an outspoken hawk, has criticized communication from the central bank on interest rates, explaining that it has only boosted borrowing costs in the UK in ways that should be of no comfort to officials, Reuters reported. Mann added that the central bank should have taken an appropriate decision soon after the Iran war outbreak.
BoE’s Mann flags need for higher rates despite tighter conditions
FXS Speechtracker’s 9.4/10 score marks a notable hawkish upgrade versus BoE’s Mann historic 8.1/10 baseline, underscoring a stronger-than-usual tightening bias. The insistence that policy cannot rely on risk premia and instead “need to raise Bank Rate” points to a clear preference for additional rate hikes even as financial conditions have already tightened.
By stressing that tighter conditions driven by higher inflation and policy uncertainty premia are “no comfort,” the speech argues that market-driven tightening is an inadequate substitute for deliberate Bank Rate increases, reinforcing the hawkish tone. The admission that BoE may not have clearly articulated the reaction function to the Middle East shock and skipped a baseline forecast in April highlights communication gaps, which likely amplified uncertainty premia and strengthens the case for a more proactive and transparent path for UK Pound-focused monetary policy tightening.
Economic Indicator
Tokyo CPI ex Fresh Food (YoY)
The Tokyo Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households in the Tokyo region excluding fresh food, whose prices often fluctuate depending on the weather. The index is widely considered as a leading indicator of Japan’s overall CPI as it is published weeks before the nationwide reading. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.
Read more.Last release: Thu Oct 01, 2026 23:30
Frequency: Monthly
Actual: 2.7%
Consensus: 2.4%
Previous: 1.8%
Source: Statistics Bureau of Japan
- AUD/USD edges higher to near 0.6940 in Friday’s early European session.
- The pair keeps a bearish vibe; a temporary rebound cannot be ruled out with an oversold RSI.
- The first downside target is in the 0.6905-0.6900 region; the immediate resistance level emerges at 0.7000.
The AUD/USD pair gathers strength to around 0.6940 during the early European trading hours on Friday. Markets might turn cautious later in the day ahead of the key US economic data and escalating conflicts in the Middle East.
Traders will closely monitor the US employment data for September for fresh impetus. Economists expect job growth to slow in September, while the unemployment rate is forecast to stay at 4.1% for the third consecutive month.
If the reports show a stronger-than-expected outcome, this could reinforce the Federal Reserve (Fed) to lift the interest rate, supporting the Greenback.
Markets are now pricing in nearly a 74% odds of the Fed standing pat in October compared to 36% a week earlier, according to the CME FedWatch tool. They still expect a rate hike by the end of the year.
The chance of the Reserve Bank of Australia (RBA) raising interest rates in November has fallen sharply after the latest Consumer Price Index (CPI) came in line with expectations.
Money markets are now betting the Australian central bank will likely leave rates unchanged at its November policy meeting. The probability of a rate hike fell to around 20%, data from LSEG showed.
RBA seen on hold as softer CPI and housing weakness curb Aussie tailwinds
Analysts at Commerzbank argue that the latest data underscore why “1.5 additional rate hikes by the RBA – as the market was still expecting yesterday – are likely to be too much.” One day after the Reserve Bank of Australia’s monetary policy meeting, they note that the CPI figures released today “also show” the case for further tightening has diminished. While acknowledging that “there’s no question that inflation is still too high, and it will take a while before it returns to the middle of the target range,” Commerzbank stresses that “interest rate hikes always take effect with a certain time lag,” particularly in the real estate market, “where building permits fell again in August by 6.1% compared to the previous month and prices in the largest cities continue to decline.” Against this backdrop, they judge that “the RBA would likely be well advised to wait and see how things develop in the coming months,” concluding that “as a result, the AUD is unlikely to receive any further tailwind.”
Logan’s hawkish tilt lifts Fed expectations and supports the Dollar
Fed’s Logan delivered a notably more hawkish message, with a FXS Speechtracker score of 9.2/10 compared to the established baseline of 8.1/10, underscoring a stronger tightening bias. The emphasis that higher yields may reflect increased term premiums, potentially reducing the need for additional tightening, sits in tension with explicit calls for at least 50 bps more in rate hikes and several additional moves to revive price stability, reinforcing a view that policy is not yet restrictive enough despite a strengthening economic expansion and balanced labor market. Overall, the tone points to a Fed willing to push rates higher until inflation is credibly on track to 2%, a backdrop typically supportive for the Dollar and yields.
The FXS Fed Sentiment Index rose by 1.68 points to 136.59, firmly in hawkish territory well above the neutral 100 threshold and consistent with the elevated FXS Speechtracker reading. This move signals that Logan’s remarks have meaningfully reinforced market expectations of further tightening, with the index level indicating a strong bias toward higher rates and sustained support for the Dollar.
Technical Analysis: AUD/USD retains a bearish tone amid oversold conditions
In the daily chart, AUD/USD keeps a bearish near-term tone as price holds beneath the 100-day moving average (MA) and the Bollinger middle band. The pair is now pressing toward the lower Bollinger band support region, while the Relative Strength Index (14) around 28 sits in oversold territory, suggesting that while downside pressure persists, the pace of the recent decline could start to moderate.
On the downside, immediate support is located at the lower Bollinger band near 0.6905, where sellers may begin to lose momentum if the oversold backdrop triggers profit-taking. On the topside, initial resistance appears at the 100-day MA at 0.7060, followed by the Bollinger middle band at 0.7085, with the upper Bollinger band at 0.7265 marking a more distant cap that would need to be reclaimed to challenge the prevailing bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- EUR/GBP holds near four-month lows at 0.8508, with upside attempts capped below the 0.8525 area.
- The Euro remains on its back foot as France's borrowing costs escalate to 24-year highs.
- Later in the day, Eurozone HICP data is expected to show that inflation accelerated further in September.
The Euro (EUR) edges lower against the British Pound (GBP) on Friday, set to complete its worst weekly performance in four months with a 1% sell-off, hammered by high Oil prices and mounting concerns about France’s fiscal health. EUR/GBP rallies were capped below 0.8525 on Thursday, with the four-month low of 0.8508 at hand, ahead of the release of the Eurozone’s consumer inflation data.
Eurozone’s preliminary Harmonised Index of Consumer Prices (HICP) is expected to show that inflation accelerated further in September. Headline inflation is seen increasing to a 3.6% year-on-year (Y-o-Y) rate, from 3,.2% in August, while the core inflation is expected to show more moderate growth, to 2.5% y-o-y, from 2.4% in the previous month.
France's debt concerns are bleeding the Euro
These figures pose additional pressure on the European Central Bank to hike interest rates but are unlikely to lift the Euro as concerns about France’s soaring borrowing costs remain front and centre, as the gap between the German and the French bond yields surged beyond 140 basis points on Friday.
The French government presented its 2027 budget bill on Thursday, which includes measures to reduce its fiscal deficit, but the chances of success within a divided parliament are marginal.
Beyond that, Crude Oil prices keep escalating, as the conversation between the US and Iran to end a conflict that has already entered its seventh month remains stalled. Brent Oil is trading above $101.00 on Friday, up nearly 4% for the week, which poses significant pressure on the Eurozone’s economies.
The UK calendar is thin on Friday, but the Pound keeps drawing some support from hawkish comments by Bank of England (BoE) officials. Strategists at Rabobank, however, caution that “while higher short-term interest rates are a currency positive factor, we see little room for sustainable gains for the pound from this front given that more than 100 bps of policy tightening is priced in on a 12-month view.” In their view, the current market pricing leaves limited scope for further upside from the rates channel, and “it is more likely that GBP could soften as rate hike risks are reined in.”
Economic Indicator
Harmonized Index of Consumer Prices (YoY)
The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.
Read more.Next release: Fri Oct 02, 2026 09:00 (Prel)
Frequency: Monthly
Consensus: 3.6%
Previous: 3.2%
Source: Eurostat
Economic Indicator
Core Harmonized Index of Consumer Prices (YoY)
The Core Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, – released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Core HICP excludes volatile components like food, energy, alcohol, and tobacco. The Core HICP is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.
Read more.Last release: Thu Sep 17, 2026 09:00
Frequency: Monthly
Actual: 2.4%
Consensus: 2.4%
Previous: 2.4%
Source: Eurostat
- The US Dollar Index edges lower to near 101.88; however, the outlook remains strong.
- Investors await the US NFP data for September releasing at 12:30 GMT.
- The Fed is expected hike interest rates further by 100 bps in one-year timeframe.
The US Dollar (USD) trades marginally lower on Friday ahead of the United States (US) Nonfarm Payrolls (NFP) data for September at 12:30 GMT. In the early European trade, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally lower to near 101.88, but is still close to its over-a-year high of 102.20 posted on Thursday.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.09% | 0.16% | 0.17% | 0.51% | 1.09% | 0.80% | -0.12% | |
| EUR | -1.09% | -1.00% | -0.83% | -0.60% | -0.01% | -0.30% | -1.21% | |
| GBP | -0.16% | 1.00% | -0.06% | 0.35% | 0.94% | 0.64% | -0.27% | |
| JPY | -0.17% | 0.83% | 0.06% | 0.22% | 0.83% | 0.52% | -0.41% | |
| CAD | -0.51% | 0.60% | -0.35% | -0.22% | 0.62% | 0.27% | -0.61% | |
| AUD | -1.09% | 0.00% | -0.94% | -0.83% | -0.62% | -0.30% | -1.21% | |
| NZD | -0.80% | 0.30% | -0.64% | -0.52% | -0.27% | 0.30% | -0.90% | |
| CHF | 0.12% | 1.21% | 0.27% | 0.41% | 0.61% | 1.21% | 0.90% |
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).
The US NFP report is expected to show that the economy created 90K fresh jobs, lower than 162K in August, with the Unemployment Rate remaining steady at 4.1%. The data will likely have a significant impact on Federal Reserve’s (Fed) interest rate expectations.
Meanwhile, traders remaining increasingly confident that the Fed will deliver more interest rate hikes in the near term is providing strength to the US Dollar.
Strategists at Brown Brothers Harriman (BBH) note that "USD is up across the board, with the DXY index making new cyclical highs," underpinned by a resilient US backdrop. They point to "resilient US economic activity, improving labor demand, and sticky inflation" as key factors that "back the nearly 100bps of Fed funds rate hikes priced over the next twelve months," reinforcing the constructive tone toward the Dollar.
Higher hawkish Fed expectations have boosted US Treasury Yields. In the European trade on Friday, 10-year US Treasury Yields are flat at around 5.25% but are still close to its over two-decade high of 5.34% posted the previous day.
US Dollar Index Technical Analysis
In the daily chart, Dollar Index Spot trades at 101.88. The index holds above the 20-day exponential moving average (EMA) at 100.70, which keeps the near-term bias bullish as price extends its advance away from this dynamic floor. The Relative Strength Index (14) at 73.18 sits in overbought territory, hinting that the latest breakout is stretched but not yet reversed.
On the downside, initial support is seen at the 20-day EMA at 100.70. Looking up, the fresh annual high at 102.20 is the immediate resistance; above that the 10 April 2025 high at 103.03 would be the key hurdle.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- Tokyo CPI accelerated to 2.7% YoY in September, boosting expectations for Bank of Japan policy hawkishness.
- The US Dollar weakened as traders priced in under a 28% chance of an October Fed rate hike.
- High US Treasury yields and lingering December hike bets may limit further downside for the Greenback.
USD/JPY declines after two days of gains, trading around 157.90 during Asian hours on Friday. The Japanese Yen (JPY) gained momentum following stronger-than-expected inflation data from Tokyo, putting downward pressure on the pair.
According to the Statistics Bureau of Japan, the headline Tokyo Consumer Price Index rose 2.7% year-over-year in September, accelerating from 1.9% in the previous month. Key underlying inflation metrics also saw sharp increases: the CPI excluding Fresh Food climbed to 2.7% YoY (beating expectations of 2.4% and the prior 1.8%), while the core-core index excluding both Fresh Food and Energy jumped to 3.0% YoY from 2.0%.
Japanese Finance Minister Satsuki Katayama announced plans on Friday to intensify efforts toward a Japanese adaptation of government efficiency reviews, focusing specifically on state subsidies and funds. Katayama highlighted that roughly 200 existing funds, valued at approximately 7 trillion yen, will be targeted as part of this initiative to streamline public spending.
In parallel comments, Economy Minister Minoru Kiuchi emphasized the importance of ongoing, close communication between the government and the Bank of Japan regarding future economic policy. Kiuchi noted that Japan has moved past the need for extraordinary monetary stimulus, pointing to the BoJ’s prior exit from yield curve control as evidence of this transition, while refraining from further direct remarks on monetary policy decisions reserved for the central bank.
Adding to the USD/JPY pair's decline is a broader softening in the US Dollar (USD), driven by scaled-back expectations for immediate Federal Reserve (Fed) rate hikes. Markets are currently pricing in less than a 28% chance of a Fed rate increase at the October meeting, according to the CME FedWatch Tool.
Despite the recent weakness, the Greenback may retain potential support. Persistent inflation concerns linked to elevated energy costs, alongside lingering expectations for a Fed rate hike in December, could help the currency regain traction. Furthermore, US Treasury yields remain near multi-decade highs, bolstered by resilient domestic economic performance, expectations of sustained monetary tightening, and growing worries surrounding the US government's long-term fiscal debt trajectory.
Market participants remain focused on upcoming macroeconomic releases to gauge the future path of monetary policy. Attention now shifts to the pending US Nonfarm Payrolls report, where economists anticipate job gains to moderate to 90,000 from the previous month's 162,000, while the unemployment rate is projected to hold steady at 4.1%.
Dollar strength drives USD/JPY toward key technical resistance
Strategists at Brown Brothers Harriman highlight the impact of broad Dollar strength on the pair, noting that "USD/JPY surged to its 200-day moving average at 158.49 on broad USD strength." In their view, the move brings the cross into a consolidation zone, with the bank expecting "USD/JPY to hold within a 155.00-160.00 range in the near term."
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.
- NZD/USD gains ground to around 0.5610 in Friday’s early European session.
- All eyes will be on the US September jobs report later on Friday.
- The prospect of policy uncertainty in New Zealand could undermine the Kiwi.
The NZD/USD pair recovers some lost ground to near 0.5610, snapping the three-day losing streak during the early European session on Friday. However, the potential upside for the pair might be limited, as rising US Treasury yields and a hawkish stance from the Federal Reserve (Fed) underpin the US Dollar (USD) against the New Zealand Dollar (NZD).
Oil spike from US-Iran tensions raise inflation fears, driving bond yields higher. The 10-year US Treasury yield hit 5.34%, its highest since 2002, in the previous session before retreating to 5.25%. The 30-year Treasury bond yield hovered near levels not seen in 24 years before moderating into the close.
Dallas Fed President Lorie Logan said on Thursday that the central bank will need to raise short-term borrowing costs by at least 50 basis points (bps) to turn monetary policy "modestly restrictive" and get inflation back on track to the Fed’s 2% target.
The US jobs report for September will be the highlight later on Friday. The Nonfarm Payrolls (NFP) is forecast to increase by 90,000 in September after rising by 162,000 in August. Meanwhile, the Unemployment Rate is expected to stay at 4.1% for a third straight month.
On the Kiwi front, closer New Zealand election race raises investor concerns over policy uncertainty, weighing on the domestic currency. New Zealand’s reputation for political stability is facing a test as a closely contested election approaches on November 7, with opinion polls indicating that Prime Minister Christopher Luxon’s coalition could lose power. A change in government raises the prospect of policy uncertainty. If elected, Labour signaled that it would restore that dual mandate, among other policy reversals.
Logan’s hawkish tilt lifts Fed expectations and supports the Dollar
Fed’s Logan delivered a notably more hawkish message, with a 9.2/10 FXS Speechtracker score standing well above the 8.1/10 historical average, underscoring a stronger tightening bias relative to the established baseline. The emphasis that higher long-term yields may reflect rising term premiums, potentially reducing the need for additional tightening, sits in tension with explicit calls for at least 50 bps more in rate hikes and several further moves to revive price stability, reinforcing a narrative that policy is not yet restrictive enough and that inflation will not reach 2% without higher rates. Overall, the combination of stronger economic expansion, a well-balanced labor market, and explicit rate hike guidance points to a clear hawkish signal supportive of the Dollar and U.S. yield curves.
The FXS Fed Sentiment Index rose by 1.68 points to 136.59, confirming a deeper move into hawkish territory well above the neutral 100 threshold and aligning with the elevated FXS Speechtracker score. This upward shift in the FXS Fed Sentiment Index suggests markets should price in a higher-for-longer Fed path, with potential upside pressure on the Dollar and continued sensitivity of risk assets to U.S. rate expectations.
Technical Analysis: NZD/USD keeps bearish tone amid oversold conditions
In the daily chart, NZD/USD extends its slide beneath the Bollinger middle band and the 100-day simple moving average (SMA), which keeps the near-term bias firmly bearish. Price is now holding just above the lower Bollinger band, hinting at stretched downside conditions, while the Relative Strength Index (RSI) at 24.8 sits in oversold territory, suggesting that while selling pressure remains dominant, the pace of the decline could start to moderate.
On the topside, initial resistance emerges at the Bollinger middle band near 0.5725, followed by the 100-day SMA around 0.5810 and the upper Bollinger band at 0.5885, a cluster that would cap any corrective bounce for now. On the downside, the lower Bollinger band at 0.5565 offers immediate support; a decisive break below this floor would open the door to a continuation of the bearish trend, whereas holding above it would favor a short-term consolidation within the current oversold backdrop.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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