Forex News
DBS Group Research economist Chua Han Teng notes that Bank Negara Malaysia (BNM) held the Overnight Policy Rate at 2.75% while dropping language that the current level is appropriate. DBS expects rates to remain unchanged through 2026 but sees risks tilted towards a one-off policy normalisation.
BNM holds but signals flexibility
"Bank Negara Malaysia (BNM) maintained its Overnight Policy Rate (OPR) at 2.75% on September 3, extending its pause for a seventh consecutive decision."
"We maintain our view for BNM to stay on hold for the remainder of 2026, given contained inflation amid a resilient economy, but see the balance of risk tilted towards a possible one-off policy normalisation."
"In its monetary policy statement, BNM notably flagged two key areas that warrant vigilance in assessing the inflation outlook."
"First, policymakers will continue to evaluate the still fluid and unresolved conflict in the Middle East, which will likely keep global commodity prices, particularly energy prices, elevated relative to a year ago, and generate upward cost pressures through the supply-side shock."
"Second, the authorities will monitor whether strong economic growth (potentially around 5% in 2026 and resilient in 2027), partly driven by robust artificial intelligence-related tailwinds, translates into stronger demand-pull price pressures due to rising wage growth. Thus far, the capital-intensive nature of this expansion has limited spillovers to domestic inflation."
"The door is now open for a normalisation of July 2025’s 25bps insurance OPR cut in subsequent meetings if incoming economic activity data and external developments evolve favourably and inflationary pressures rise."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
OCBC’s Christopher Wong notes that strong foreign-currency inflows linked to the RBI’s special measures have bolstered the Indian Rupee (INR) and strengthened the central bank’s FX buffer. However, with the FCNR(B) window now closed, the exceptional near-term dollar supply is expected to fade, potentially leading to more two-way RBI management. Wong adds that USD/INR remains under bearish pressure, though oversold conditions may slow the pace of decline, with support at 94.30 and 94.15.
RBI-backed inflows support INR, but near-term dollar supply may fade
"USD/INR gapped down in the open yesterday. It was reported that RBI’s special measures attracted US$136.4bn of foreign-currency inflows, including US$127.2bn through FCNR(B) deposits."
"The scale of the inflows materially strengthens the RBI’s FX buffer, but has also pushed banking system liquidity to a record INR9.7tn and lifted its forward dollar liabilities to around US$137bn."
"With the FCNR(B) window now closed (as of 31 Aug), the exceptional near-term dollar supply should fade."
"Potentially, there may be more two-way management from here, with the RBI potentially using periods of INR strength to absorb USD or reduce its forward exposure rather than allowing appreciation to run unchecked."
"USD/INR closed at 94.50 levels. Bearish momentum on daily chart intact but RSI fell to oversold conditions. Moderation in pace of decline is not ruled out."
"Support at 94.30 levels, 94.15 (Jun low). Resistance at 96.74 (76.4% fibo), 95.10 (61.8% fibo retracement of Jun low to Jul high)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Nordea expects Eurozone inflation dynamics to stay persistent, with headline inflation projected above the ECB’s target at least until spring 2027. They see recent data as slightly weaker than the ECB’s June projections, partly due to soft food prices, but anticipate only modest downward revisions. Core inflation is projected to remain above 2% through 2028, supporting further ECB rate hikes.
Inflation seen persistent and above target
"Beyond energy, recent headline inflation data have come in slightly weaker than the ECB projected in June, partly because of weak food price inflation."
"We therefore expect small downward revisions to the 2026 and 2027 headline inflation forecasts, although the adjustments are likely to be modest."
"Inflation should nevertheless remain above the ECB's target at least until spring 2027."
"Core inflation developments have been broadly in line with the June projections, and we therefore expect the projected core inflation profile to remain largely unchanged."
"This would imply that core inflation remains above 2% through the end of 2028, which, in our view, supports the case for further ECB rate hikes."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Cleveland Federal Reserve (Fed) President Beth Hammack said on Friday that the current monetary policy stance is not restrictive, emphasizing that inflation is too high. In an article on LinkedIn, she added that local contact views indicate that “now is the time for the Fed to hike to control inflation.”
Key highlights:
Inflation is still above 3 percent. The labor market is stable and near my estimate of maximum employment.
Both the hard data and the anecdotes are telling me the same thing: policy is not restrictive
Inflation is too high—and the longer it stays above our objective, the harder it will be to bring it back down.
Right now, what I'm hearing is that it's time to act.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | 0.09% | 0.22% | 0.31% | -0.03% | -0.02% | 0.31% | |
| EUR | -0.13% | -0.04% | 0.09% | 0.21% | -0.17% | -0.13% | 0.18% | |
| GBP | -0.09% | 0.04% | 0.13% | 0.25% | -0.12% | -0.09% | 0.22% | |
| JPY | -0.22% | -0.09% | -0.13% | 0.11% | -0.26% | -0.23% | 0.08% | |
| CAD | -0.31% | -0.21% | -0.25% | -0.11% | -0.37% | -0.35% | -0.03% | |
| AUD | 0.03% | 0.17% | 0.12% | 0.26% | 0.37% | 0.03% | 0.34% | |
| NZD | 0.02% | 0.13% | 0.09% | 0.23% | 0.35% | -0.03% | 0.31% | |
| CHF | -0.31% | -0.18% | -0.22% | -0.08% | 0.03% | -0.34% | -0.31% |
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).
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.
ING’s Muhammet Mercan notes the Central Bank of the Republic of Türkiye (CBRT) has normalised liquidity via weekly repo auctions, bringing effective funding costs down to the 37% policy rate. ING expects the CBRT to hold rates at the September meeting, then deliver two 100bp cuts to 35% in the fourth quarter, with further Gulf conflict escalation posing upside inflation risks and the policy rate seen at 35% by 2026.
Liquidity normalisation and planned cuts
"Towards the end of August, the Central Bank of Turkey took a step to normalise liquidity and started weekly repo auctions."
"Accordingly, the effective cost of funding and TLREF dropped directly to the level of the policy rate at 37% from 40%."
"The CBRT is likely to remain on hold in the September meeting this Thursday after this liquidity move."
"We see two 100bp cuts to 35% in the last quarter given the weaker-than-expected 2Q GDP data and further gradual cooling of inflation, though any further escalation in the Gulf conflict would add to upside risks."
"We see the policy rate at 35% by the end of 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD resumes its advance after quickly reversing its NFP-driven decline.
- Strong US employment data lift Fed interest rate hike expectations, but the US Dollar struggles to hold its gains.
- Hawkish RBA expectations keep the Australian Dollar supported.
AUD/USD resumes its advance on Friday after a brief bout of weakness following a stronger-than-expected United States (US) employment report. The pair initially fell to 0.7173 before reversing as the US Dollar (USD) struggled to capitalize on the upbeat figures, even as they strengthened expectations of a Federal Reserve (Fed) rate hike at the September 15-16 meeting. At the time of writing, AUD/USD trades around 0.7206, near levels last seen on May 15.
US Nonfarm Payrolls (NFP) increased by 162K in August, well above market expectations for a 56K gain. July’s reading was revised higher to 21K from the previously reported 23K decline, while the Unemployment Rate held steady at 4.1%, as expected. US Bureau of Labor Statistics
The US Dollar jumped after the employment report but quickly lost momentum. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.10 after climbing to 99.36.
According to the CME FedWatch Tool, markets now price in around a 60% chance of an increase, up from 50% before the NFP release.
Uncertainty over the Fed’s policy path persists, with the outcome of the September meeting likely to hinge on next week’s US Consumer Price Index (CPI) and Producer Price Index (PPI) reports. Recent inflation data points to some moderation, although elevated Oil prices due to the war in the Middle East continue to complicate the inflation outlook.
Cleveland Fed President Beth Hammack said in a LinkedIn post that policy is not restrictive, adding that “inflation is too high — and the longer it stays above our objective, the harder it will be to bring it back down.”
The Australian Dollar remains supported by the RBA’s hawkish stance, with traders anticipating another rate increase later this month as inflation sits above the central bank’s 2%-3% target band, while resilient second-quarter growth gives policymakers room to tighten further.
Looking ahead, Australia’s economic calendar is relatively light next week, with September Consumer Inflation Expectations the only major domestic release. Chinese inflation and trade data will also draw attention given Australia’s close trade ties with China.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
- Gold drops as strong NFP boosts Fed hike expectations.
- The US Dollar stays firm despite fading post-jobs yield spike.
- PPI and CPI data could confirm September tightening bets.
Gold (XAU/USD) price retreats by about 0.80% on Friday, after registering losses of over 2% following the release of an upbeat US jobs report. This boosted the Greenback amid growing speculation that the Federal Reserve (Fed) could raise rates if inflation data next week comes hotter than expected. At the time of writing, XAU/USD trades at $4,437.
XAU/USD retreats as upbeat jobs data supports Dollar and September tightening risks
Nonfarm Payrolls in August crushed estimates of 56K, coming in at 162K, while July’s print was upward revised from -23K to 21K. At the same time, the Unemployment Rate was unchanged at 4.1%. The data reassured Fed officials that if needed, they can raise rates without harming the labor market.
Last week, Fed Chairman Kevin Warsh said the jobs market was “consistent with full employment” in a speech in Jackson Hole, in which he leaned hawkish, placing inflation as the foremost mission.
On Thursday, Fed Governor Christopher Waller said the Fed isn't rushing to raise rates if inflation cools, but a weak data release next week favors a rate increase at the FOMC's meeting.
Money markets have priced in a 61% chance for a rate increase by the Fed at the September meeting, up from 54% a day ago, as shown by Prime Terminal.
US Treasury yields, namely the 10-year T-note, rose to a high of 4.81% before erasing post-NFP gains and are down to 4.768%. The Greenback also gave back some of its gains, but it remains in positive territory, as indicated by the US Dollar Index (DXY).
The DXY, which measures the performance of the US Dollar against six currencies, is up 0.13% at 99.13.
Following the US NFP release, traders await next week’s producer and consumer inflation reports. If both show persistent disinflation, a rate hike might not be necessary.
Next week, the US economic docket highlight will be the release of the Producer Price Index (PPI), the Consumer Price Index (CPI), jobless claims data, the US Monthly Budget Statement and the University of Michigan Consumer Sentiment for September.
XAU/USD technical outlook: Gold consolidates within 100- and 200-day SMAs
Price action shows Gold is poised to trade sideways, capped on the downside by the 100-day Simple Moving Average (SMA) at $4,354 and on the upside by the 200-day SMA at $4,534.
The Relative Strength Index (RSI) is bullish, but in the short term it is trending downward toward the 50-neutral level, an indication that sellers are gaining momentum.
For a bearish continuation, XAU/USD must drop below the $4,400 mark, followed by the 100-day SMA. Below this area, the next target will be the day's low at $4,282.
For a bullish continuation, Gold must rise above $4,450. If buyers gain enough momentum, they could challenge $4,500 before targeting August’s monthly peak of $4,697.
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.
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