The dollar index edged slightly lower below 98 on Friday but remained close to the two-week highs reached earlier in the week and was on track to end the first week of February up nearly 0.9%. The greenback drew support from its safe-haven appeal throughout the week, particularly on Thursday, when weaker-than-expected US labour data raised concerns about the health of the economy and, alongside a tech sell-off and a sharp decline in crypto assets, triggered a flight to safety. Sentiment improved on Friday amid a rebound in tech stocks and preliminary data showing that the University of Michigan consumer sentiment index unexpectedly climbed to a six-month high. Looking ahead, investors will turn their attention to the delayed US jobs report and the CPI release next week for further clues on the Fed’s outlook. Markets are currently pricing in around 58bps of Fed rate cuts this year, up from about 50bps earlier in the week. The dollar weakened mainly against the pound and the Aussie.

Dollar to End the Week Higher

The South African rand strengthened to around 16.1 per USD, bouncing back from recent over two-week lows of 16.3, bolstered by the rebound in prices of key precious metals, particularly gold. The currency has experienced heightened volatility recently, driven by sharp swings in precious-metal prices, underscoring South Africa’s strong dependence on commodity exports. Investors are now turning their focus to next week’s mining and factory output data for clues on the economy’s health.

South African Rand Firms

The Canadian dollar strengthened toward 1.365 per US dollar, trimming losses accumulated since late January after briefly touching 16 month highs, as labour data reduced the downside risk to Canada’s growth and policy outlook, narrowing expectations for aggressive Bank of Canada easing. January labour data showed the unemployment rate falling to 6.5%, the lowest since September 2024, driven by a sharp drop in job searchers and continued resilience in full time employment, up 0.9% year-on-year. Wage growth remained firm at 3.3%, reinforcing evidence that underlying labour cost pressures have not eased and limiting the scope for rapid rate cuts. This backdrop has supported Canadian yields relative to recent expectations and helped reprice the BoC toward a slower and more cautious easing path, underpinning the currency. The loonie has also drawn support from a pause in US dollar strength following softer US labour indicators.

Canadian Dollar Rebounds After Labor Data

Sterling edged back toward $1.36 at the end of a volatile week that nonetheless put sterling on track for its sharpest weekly decline against the dollar since late October, driven by a mix of political turbulence and a more dovish-than-expected message from the Bank of England. Sterling came under pressure as political uncertainty flared on Thursday, with questions raised over the durability of Prime Minister Keir Starmer’s leadership following his appointment of Peter Mandelson as UK ambassador to the US, a move that drew scrutiny due to Mandelson’s past links to Jeffrey Epstein. On the policy front, the BoE left interest rates unchanged but surprised markets with a narrow 5–4 vote to hold. Four MPC members supported an immediate 25 bp cut, citing expectations that inflation will fall back toward the 2% target from April. The Bank noted that risks from persistent inflation have eased, while downside risks from weaker demand and a softening labor market have become more pronounced.

Sterling Faces Worst Weekly Fall Since October

The offshore yuan held around 6.93 per dollar on Friday, heading for its strongest weekly gain since May 2023, supported by seasonal demand and upbeat sentiment following the Trump-Xi call. Ahead of the Lunar New Year holiday, companies typically increase dollar-to-yuan conversions to meet payroll and bonus obligations. Market sentiment was further boosted after US President Donald Trump described an “excellent” phone call with Chinese President Xi Jinping, with expectations of a possible visit to China in April and emphasis on his personal rapport with Xi. However, yuan gains may slow amid near-term US dollar strength and thinner trading as the holiday approaches. Additional restraint came from the PBOC, which set the daily midpoint at 6.9590 per dollar, weaker than a Reuters estimate and easing from a 32-month high set earlier this week. Markets now await next week’s inflation data for China’s economic health and the outlook for monetary policy.

Offshore Yuan Set for Biggest Weekly Gain Since 2023

The Indonesian rupiah dipped toward IDR 16,880 per dollar on Friday, near a two-week low and close to last month’s record trough of 16,985. Sentiment weakened after Moody’s cut Indonesia’s credit rating outlook to negative from stable on Thursday, citing declining policy predictability. The move followed MSCI’s warning over transparency issues, which recently triggered a market selloff exceeding USD 80 billion. Moody’s highlighted concerns over policy effectiveness and weakening governance, warning that prolonged deterioration could erode Indonesia’s long-standing credibility. Domestically, GDP growth reached 5.11% in 2025, missing the government’s 5.2% target despite solid Q4 momentum, reinforcing expectations that Bank Indonesia may have scope to ease policy further this year. Meanwhile, forex reserves fell in December from a nine-month high, narrowing the external buffer. Globally, the dollar index notched a two-week high as broad risk-asset selloffs lifted demand for safe havens.

Rupiah Faces Pressure from Moody’s Outlook Cut, GDP Miss, and Firm Dollar

The Indian rupee rose to around 90.2 per dollar, extending gains to its strongest level in over three weeks as the central bank signaled continued policy stability. The Reserve Bank of India kept its key repo rate unchanged at 5.25%, in line with expectations. The hold reflects confidence in a softer inflation outlook and reassures markets that accommodative conditions will persist. The currency also continues to receive support from residual optimism over the US-India trade deal, which reduces US tariffs on Indian imports from nearly 50% to 18%, while protecting agricultural and key export sectors. At the same time, one-off dollar sales and relatively light market positioning further lifted the rupee, despite external headwinds and a fragile risk environment. Analysts note that near-term movements will continue to hinge on global risk sentiment, capital flows, and clarity around trade deal implementation, as well as the Budget session.

Indian Rupee Hits Over 3-Week High on RBI Rate Hold

The South Korean won rose to around 1,470 per dollar, pausing losses after hitting a two-week low, supported by signals of net inflows of foreign currency. South Korea reported its largest-ever annual current account surplus in 2025. The surplus reached US$123.05 billion, exceeding both the previous record of $105.1 billion set in 2015 and the central bank’s forecast of $115 billion. Strong exports, particularly amid a semiconductor upcycle, further reinforced investor confidence. Further bolstering sentiment, the government successfully issued $3 billion in overseas foreign exchange stabilization bonds, the largest single issuance since 2009. The offering, split into three- and five-year tranches, was tightly priced, signaling strong demand and bolstering confidence in South Korea’s external finances. While primarily aimed at strengthening foreign-exchange reserves, the bond sale helped ease near-term pressure on the currency.

Korean Won Rises on Currency Inflows

The New Zealand dollar edged up to $0.596 but stayed close to its lowest level in almost two weeks, amid reduced bets for an imminent rate hike from the Reserve Bank. A mixed jobs report earlier in the week, showing an unexpected rise in unemployment to a decade high, while employment increased more than forecast, prompted markets to push back expectations for a near-term rate hike. Traders are not fully pricing in an increase until October, while the implied probability of a September move stands at about 70%. The RBNZ is set to meet later this month in what will be the first meeting under its new governor, Anna Breman, and policymakers are widely expected to leave rates unchanged. The central bank will also release updated economic and interest-rate projections, with markets closely watching whether it maintains its guidance for a first rate increase around mid-2027. For the week, the kiwi has fallen about 1%, on track to snap a three-week winning streak.

New Zealand Dollar Remains Near 2-Week Lows

The Japanese yen steadied around 156.8 per dollar on Friday, but was still set to lose more than 1% for the week as investors prepared for this weekend’s lower house elections. The currency came under pressure amid expectations that Prime Minister Sanae Takaichi will win voter backing for increased spending and potential tax cuts, raising concerns over Japan’s fiscal outlook. Uncertainty over how the government would fund its ambitious plans and offset potential revenue losses weighed on markets. Investors are also awaiting Japan’s Q4 GDP report next week, which is expected to rebound after a sharp contraction in the previous quarter. Takaichi recently noted that a weak yen could benefit exporters, later clarifying that her comments aimed to promote an economy resilient to currency swings. The yen had rallied as much as 4.5% in late January amid speculation of a US-Japan joint currency intervention but has since surrendered more than half of those gains.

Yen Set for Sharp Weekly Drop

The Australian dollar held its recent losses below $0.70 on Friday, pulling back from three-year highs, as broad-based selling across global stocks and risk-sensitive assets weighed on the currency. The commodity-linked Aussie, often used as a liquid proxy for global risk appetite, came under pressure after a tech-led equity rout, fuelled by concerns over massive AI spending, unsettled investors. The retreat also unwound gains from earlier in the week, when the Reserve Bank of Australia lifted its cash rate by 25 basis points to 3.85% and signaled it could tighten further if inflation proves persistent. RBA Governor Michele Bullock reiterated that restrictive policy remains necessary to cool demand and ease price pressures. Markets are pricing about a 70% chance of a May hike to 4.10%, while assigning only a 50% probability of a further increase to 4.35% by year-end. Focus now turns to upcoming household spending figures next week for further cues on the policy outlook.

Australian Dollar Eases from 3-Year Highs

The dollar index traded just below 98 on Friday, staying near a two-week high as a broad selloff in stocks, commodities, and cryptocurrencies boosted demand for the currency. The greenback has gained sharply since President Donald Trump nominated Kevin Warsh as the next Federal Reserve chair, given Warsh’s preference for a smaller balance sheet and a more cautious approach to policy easing. The nomination also eased concerns about the Fed’s independence. Meanwhile, a series of US jobs data this week pointed to signs of a slowing labor market, supporting dovish bets on Fed policy. Markets currently price in two rate cuts this year, with the first expected in June and a second potentially in September. The dollar held gains against the euro and sterling after the ECB and BOE kept policy rates unchanged, but strengthened the most against the yen ahead of Japan’s lower house elections.

Dollar Holds Near 2-Week High

The Mexican peso retreated past 17.40 per US dollar giving back part of its recent gains, as markets digested Banco de México’s decision to hold the policy rate at 7.00% and signal greater caution on future easing. Earlier support from carry demand weakened as Banxico acknowledged firmer inflation risks, revised its inflation path higher through 2026, and emphasised graduality, reinforcing expectations that real yield support will narrow only slowly rather than remain firmly anchored. While the central bank’s pause limited downside by discouraging near term rate cut bets, the peso remained vulnerable to external pressure as a firmer US dollar and elevated US yields continued to raise the opportunity cost of peso exposure. Domestically, evidence that growth remains modest despite a Q4 rebound and lingering trade related uncertainty capped upside, encouraging profit taking after January’s strong appreciation.

Mexican Peso Eases After Banxico

The South African rand eased toward 16.2 per USD, the lowest since January 21, pressured by a stronger US dollar and lower prices of precious metals, particularly gold and platinum, the country's two key exports. A broader risk-off sentiment also weighed, as investors often reduce exposure to emerging markets during such periods.

South African Rand at Over 2-Week Low

The dollar index pared early gains to trade little changed at 97.6 on Thursday, as renewed concerns over the health of the US economy, the labour market, and elevated AI valuations weighed on sentiment. The Challenger report showed US companies announced 108.4K job cuts last month, the highest January total since 2009, while initial jobless claims rose to 231K, the highest in two months and well above forecasts of 212K. Adding to the cautious tone, the ADP report showed private-sector job growth fell well short of expectations. The string of weaker labour data reinforced bets on Federal Reserve rate cuts, with markets still pricing in a first reduction in June and a second potentially in September. Meanwhile, both the ECB and the Bank of England left interest rates unchanged, as expected. The dollar rose sharply against the British pound, as traders interpreted the BoE’s tone as more dovish. The greenback was little changed versus the euro but weakened against the Swiss franc.

Dollar Little Changed

The euro traded around $1.18, recovering modest early-session losses after the European Central Bank left interest rates unchanged as expected. The ECB reiterated that inflation is expected to stabilize at its 2% target over the medium term, while noting that the euro area economy remains resilient despite an uncertain outlook driven by global trade policy risks and ongoing geopolitical tensions. The central bank has kept policy unchanged since June, describing its stance as being in a “good place,” although some officials have cautioned that further euro appreciation could revive the case for additional rate cuts. Separately, Eurostat data showed headline inflation eased to 1.7% year on year in January, matching expectations and marking the lowest reading since September 2024. Core inflation also slowed to 2.2%, slightly below forecasts and the weakest since October 2021.

Euro Steadies After ECB Holds Rates

The Zambia Kwacha touched 18.58 against the USD, the highest since July 2023. Over the past 4 weeks, Zambia Kwacha lost 6.38%, and in the last 12 months, it decreased 30.66%.

Zambia Kwacha Hits 30-month High

The British pound fell 0.7% to below $1.36, its weakest level since January 22, after the Bank of England left interest rates unchanged at 3.75% but struck a more dovish tone than markets had anticipated. While the decision to hold was widely expected, the vote split surprised investors, with policymakers narrowly voting 5–4 in favor of keeping rates steady. Four MPC members backed an immediate 25 basis point cut to 3.5%, arguing that CPI inflation is expected to fall back towards the 2% target from April. The Bank said risks from persistent inflation have continued to diminish, while downside risks linked to weaker demand and a loosening labor market have become more prominent. Sterling was also pressured by rising political uncertainty, as questions emerged over the durability of Prime Minister Keir Starmer’s leadership following his appointment of Peter Mandelson as UK ambassador to the US, a move drawing scrutiny due to Mandelson’s past links to Jeffrey Epstein.

Sterling Slides as BoE Turns More Dovish

The euro slipped just below $1.18, retreating from last week’s more than four-year high of $1.20, as investors awaited the ECB’s policy decision later today. Markets widely expect rates to remain unchanged, with policymakers weighing the impact of recent euro strength and low-priced Chinese imports on the inflation outlook. The ECB has held policy steady since June, describing its stance as being in a “good place,” though some officials have warned that further currency appreciation could prompt a resumption of rate cuts. Eurostat data showed headline inflation eased to 1.7% year-on-year in January, in line with expectations and the lowest since September 2024, while core inflation fell to 2.2%, slightly below forecasts and its weakest reading since October 2021. Meanwhile, the dollar hovered near a two-week high as investors scaled back expectations for aggressive Federal Reserve rate cuts.

Euro Softens Ahead of ECB Decision as Inflation Cools

The Indian rupee rose toward 90.1 per dollar, extending gains to its strongest level in over three weeks amid moderated corporate dollar activity. Corporate flows continued to influence the currency, while easing forward premiums and increased exporter hedging have helped temper near-term depreciation pressures. Additionally, the currency continues to draw some support from the recent US-India trade deal, which cuts US tariffs on Indian goods from 50% to 18% while maintaining protections for certain agricultural products. Key details, including timelines, product coverage, and enforceability, have yet to be confirmed. Analysts say the deal underpins Indian assets, though sustained gains will depend on clarity around implementation and broader capital flows. Investors remain cautious ahead of developments in the Budget session and the Reserve Bank of India’s interest rate decision scheduled for February 6, 2026.

Indian Rupee Rises to Over 3-Week High

The Indonesian rupiah weakened to near IDR 16,830 per dollar on Thursday, after remaining relatively unchanged in the prior three sessions. The move largely tracked a firmer greenback, as the dollar index climbed to a near two-week high after markets expected a slower pace for potential Fed rate cuts. Locally, fresh data showed Indonesia’s economy grew 5.11% in 2025, falling short of the government’s 5.2% target despite solid growth in Q4. The outcome reinforced bets that Bank Indonesia may have room to ease policy further this year, as it has emphasized the need to support growth amid views that output remains below potential, even after a cumulative 150bp cut since September 2024. Sentiment was also cautious ahead of January’s forex reserves data due Friday, following a nine-month high in December. However, the downside was partially tempered by comments from Finance Minister Purbaya Yudhi, who said a move toward IDR 15,000 per dollar is achievable under supportive policy measures.

Rupiah Softens After GDP Data

The South Korean won depreciated to around 1,464 per dollar, erasing earlier-week gains to hit a two-week low, as persistent domestic demand for US dollars continued to outweigh official stabilisation efforts. The decline reflects structural capital outflows, with Korean retail investors increasingly favouring US equities. Overseas holdings hit nearly $171 billion as of January 29, while a surge in US stock purchases has added further pressure. The shift toward foreign assets has also pushed resident dollar deposits to a record $119.43 billion, limiting the impact of FX policy tools despite solid economic fundamentals and equity market gains. Meanwhile, concerns were partly eased by upgraded economic forecasts. A KCIF report showed eight major global investment banks raised South Korea’s 2026 growth outlook to 2.1%, up 0.1 percentage point from last month and above the Bank of Korea’s 1.8% and the government’s 2% estimates, citing a rebound in the global semiconductor industry.

Korean Won Slides to Two-Week Low

The Australian dollar held steady around $0.70 on Thursday, trading near three-year peaks, supported by the Reserve Bank’s hawkish policy outlook and robust trade balance data. Figures showed the country's trade surplus widened to AUD 3.37 billion in December 2025, up from November’s three-month low and slightly above market forecasts. The improvement was driven by a rebound in exports amid stronger year-end shipments of metal ores and minerals, while imports fell to a three-month low. The Aussie has also been underpinned since the central bank hiked rates a quarter-point to 3.85% in its February meeting, leaving the door open to further tightening. Markets imply around an 80% chance of a hike at its May policy meeting, and a 50% probability that rates could end the year at 4.35%. Elsewhere, the AUD climbed to a thirty-five-year high against the Japanese yen, while the US dollar was broadly stronger as markets priced in a slower pace for potential Federal Reserve rate cuts.

Australian Dollar Steady Near 3-Year Highs

The Japanese yen traded near 157 per dollar on Thursday, hovering at its weakest level in nearly two weeks and down more than 1% so far this week ahead of lower house elections this weekend. PM Takaichi’s ruling LDP is expected to gain seats in the election as she seeks voter support for increased spending and other policy goals. Japanese bonds and the yen have faced pressure since Takaichi took office, with her push for expansionary fiscal policies raising concerns over Japan’s debt outlook. Investors are also looking ahead to Japan’s Q4 GDP report due next week, which is expected to rebound after a sharp contraction in the prior quarter. Meanwhile, Takaichi suggested last weekend that a weak yen could benefit exporters, later clarifying that her comments were meant to encourage an economy resilient to currency swings. The yen had rallied as much as 4.5% in late January amid speculation of a US-Japan joint currency intervention but has since given up more than half of those gains.

Yen Holds Decline Ahead of Elections

The dollar index held above 97.5 on Thursday, near a two-week high, as markets priced in a slower pace for potential Federal Reserve rate cuts. Fed Governor Lisa Cook emphasized concerns over stalled inflation progress rather than a cooling labor market, suggesting she would not support a rate cut until price pressures ease. Investors also considered the implications of Kevin Warsh’s nomination as Fed chair, noting his preference for a smaller Fed balance sheet and expectations that he would be less aggressive on rate reductions. On the data front, the ADP report showed private employment growth fell well below expectations, while services activity exceeded forecasts. Attention also turned to upcoming ECB and BOE policy meetings, which are both expected to hold rates steady. Meanwhile, Japan’s lower house election this weekend continued to weigh on the yen amid bets on fiscal expansion.

Dollar Strengthens on Hawkish Fed Signals

The Turkish lira weakened to a record low of 43.5 per USD in February amid the controlled devaluation by the Central Bank of Turkey, as markets assessed the outlook of currency flows for the year. The central bank continued to manage their foreign exchange reserves and maintained measures to stimulate lira deposits by domestic investors to control the pace of the currency's depreciation, which resulted in a 20% loss of its value against the dollar last year. In the meantime, the TCMB cut its benchmark policy rate by 10.5 percentage points to 37% in its January meeting, noting that slowing trends in underlying inflation warrant a softer magnitude of restrictive policy, even though higher food prices supported the headline rate. The latest inflation rate held close to the 31% mark, firmly above the 27% hike in the national minimum wage for the year, which extended the trend of undershooting official inflation figures to squeeze purchasing power.

Turkish Lira Extends Controlled Weakening

The dollar index was at 97.5 on Wednesday, holding its slight rebound since dropping to the near six-year low of 96 in late January amid fresh pullback for basket counterparts, while markets continued to gauge the uncertain rate outlook for the Federal Reserve this year. The postponement of major labor market data this week increased the scrutiny for the ADP report, which missed estimates to consolidate the view of a low-hiring backdrop domestically. Still, the dollar maintained most of its rebound as lower inflation in the Eurozone maintained some of the calls that soft prices and a weak dollar may prompt the ECB to ease rates this year. Additionally, the yen sustained its selling pressure on reports that the BoJ has a high hurdle for intervention in currency and bond markets should PM Takaichi be re-elected and follow through with overly expansive fiscal policy. Domestically, supply of dollars could be capped on incoming Fed Chair Warsh's preference on a small Fed balance sheet.

US Dollar Index Holds Rebound

The Brazilian real strengthened toward 5.22 per US dollar, rebounding toward its strongest levels since May 2024 as markets digested the latest Brazilian central bank’s decision minutes. Policymakers signalled easing is likely to begin in March but emphasized that the pace and size of cuts will remain strictly data dependent, an outcome viewed as a predictable transition rather than a dovish shock. This reduced the policy risk premium and supported carry and duration inflows while the Selic remained elevated at 15%. A softer US dollar against emerging market and commodity currencies further eased pressure on USD BRL and improved the real’s appeal to foreign investors. Support was reinforced by favourable terms of trade and steady foreign demand for Brazilian assets anchored in high real yields. Elevated US yields have had limited spillover so far, allowing domestic factors to dominate, though persistent fiscal uncertainty and political noise continue to cap upside.

Brazilian Real Rebounds

The euro held near $1.18, below last week’s more than four-year high of $1.20, as investors digested January’s Eurozone CPI data ahead of Thursday’s ECB policy decision. EUROSTAT figures showed headline inflation eased to 1.7% year-on-year, in line with expectations and the lowest since September 2024, while core inflation fell to 2.2%, slightly below forecasts and its lowest since October 2021. Markets widely expect the ECB to keep interest rates unchanged, as policymakers weigh the impact of a stronger euro and low-priced Chinese imports on the inflation outlook. The central bank has held policy steady since June, with officials describing it as being in a “good place,” though some warned that further euro strength could prompt a resumption of rate cuts.

Euro Steady Ahead of ECB as Inflation Eases

The Indonesian rupiah weakened slightly to around IDR 16,770 per dollar on Wednesday, reversing modest gains in the previous session, as sentiment turned cautious ahead of key domestic data. Markets await Thursday’s Q4 GDP release, with economic growth seen slowing further due to lingering effects of last year’s Sumatra disaster. Meanwhile, January's forex reserves data will also be due in the coming days after December’s nine-month high. Expectations of further monetary easing have risen following 150bp of cuts since September 2024, as Bank Indonesia prioritizes growth this year amid below-potential output. Still, weakness was capped after Finance Minister Purbaya Yudhi said the rupiah’s fair value is near 16,500. Separately, Jakarta confirmed the US–Indonesia reciprocal tariff deal has been concluded and awaits signing. Globally, the dollar index was subdued after US President Donald Trump approved a USD 1.2 trillion budget, ending a partial government shutdown that began Saturday.

Rupiah Edges Lower Ahead of Q4 GDP Data

The Indian rupee edged lower to around 90.5 per dollar, pausing gains from the previous session amid corporate dollar buying and in anticipation of the RBI swap. Corporates stepped up dollar purchases to hedge import costs and other overseas obligations. At the same time, investors monitored the Reserve Bank of India’s $10 billion 3-year dollar-rupee swap scheduled later in the day, which could influence liquidity and trading activity. Meanwhile, the currency continues to receive some support from the US-India trade deal, which reduces US tariffs on Indian goods from 50% to 18% while retaining protections for certain agricultural imports. Key details, including timelines, product coverage, and enforceability, remain unconfirmed. Analysts note the deal supports exports in textiles, apparel, and industrial goods, though India’s trade deficit may limit immediate rupee gains. The RBI is expected to maintain its policy repo rate at 5.25% after 125 bps of cuts in 2025.

Indian Rupee Pulls Back Amid Hedging and RBI Swap

The offshore yuan held its gains around 6.93 per dollar on Wednesday, as improving outlooks for the currency bolstered sentiment. Major global investment banks have grown more constructive on the yuan after it broke through the key 7-per-dollar level late last year. The yuan rose about 4.5% against the dollar in 2025, supported by a softer greenback, shifting interest-rate expectations, and renewed confidence in China’s macroeconomic stabilization. Year-end forecasts from 13 banks now put the yuan at 6.91 per dollar, a notable upgrade from early December projections that had it staying above 7 level until 2026. However, analysts also expect any further appreciation to be gradual and carefully managed, as the PBOC has expressed unease over the yuan’s rapid gains. On the economic front, a private survey showed the composite PMI rose to a three-month high of 51.6 in January, as both manufacturing (50.3 vs 50.1) and services (52.3 vs 52) sectors continued to grow.

Offshore Yuan Holds Gains

The New Zealand dollar edged lower to $0.603 on Wednesday, retreating from a near seven-month high, as a mixed jobs report left policy expectations for later this month largely unchanged. The country’s unemployment rate ticked up to 5.4% in the fourth quarter, its highest level since 2015, slightly above both the previous reading and market expectations of 5.3%. Meanwhile, employment rose by 0.5% over the quarter, stronger than the estimated 0.3% growth, signaling a stabilization in the labor market. Overall, the figures were broadly in line with the Reserve Bank of New Zealand’s projections, reinforcing expectations that policymakers will keep the official cash rate unchanged at 2.25% at their upcoming meeting later this month. Markets trimmed the probability of any near-term rate hike, with expectations now pointing to no change until at least September, when a 25 bps increase is currently priced in at around 78%, while most economists anticipate the first rate hike by December.

New Zealand Dollar Ticks Down After Mixed Jobs Report

The Japanese yen depreciated past 156 per dollar on Wednesday, sliding for the fourth straight session to a near two-week low ahead of this weekend’s snap lower house election. Prime Minister Sanae Takaichi’s ruling LDP is expected to gain more seats in the national election as she seeks voter backing for increased spending, tax cuts and a new security strategy. Japanese bonds and the yen have come under pressure since Takaichi’s election as she pushes for expansionary fiscal policies, raising concerns about Japan’s fiscal outlook on fears of debt-funded spending. Takaichi also said over the weekend that a weak yen could be an opportunity for export industries, before walking back those comments, clarifying that her remarks were intended to promote an economy resilient to currency swings. The yen had rallied as much as 4.5% in late January on speculation of a US-Japan joint currency intervention but has since retraced more than half of those gains.

Yen Slides Further Ahead of Snap Election

The dollar index held around 97.4 on Wednesday, pausing its recent rally as the partial government shutdown delayed key economic releases, keeping investors cautious. The latest job openings data and the January jobs report, both scheduled for this week, were postponed, providing no fresh signals about the health of the US labor market. President Donald Trump signed a $1.2 trillion budget to end the partial shutdown, though funding for the Department of Homeland Security remains unresolved. Meanwhile, the dollar had gained in recent sessions after Trump nominated Kevin Warsh as the next Federal Reserve chair, a pick seen as less dovish than other candidates, while strong US manufacturing data tempered expectations for rapid rate cuts. Markets still anticipate the Fed could lower rates twice this year, possibly in June and October.

Dollar Muted as Delayed Data Weighs

The Australian dollar strengthened further to around $0.703 on Wednesday, extending the prior session’s hawkish-policy-driven rally and moving back toward three-year highs as markets wagered on more rate hikes, while upbeat services PMI added support. The Reserve Bank raised its cash rate for the first time in two years in its February meeting amid stronger economic growth and a persistent inflation outlook. With the central bank entering a rate-hiking cycle, investors ramped bets of a May rate increase to 80% and now see about 40 bps of additional tightening priced in for 2026. Analysts noted that while the RBA’s base case suggests only one more hike, elevated inflation risks could prompt additional increases. That view was reinforced by fresh data showing Australia’s services sector posting its strongest expansion in nearly four years, underscoring the economy’s ongoing upswing. Markets now await upcoming trade balance figures this week for further clues on the economy’s health.

Aussie Dollar Approaches 3-Year Highs

The dollar index was little changed at 97.6 on Tuesday, after surging about 1.2% over the previous two sessions, as President Trump’s nomination of Kevin Warsh as the next Fed chair and a strong ISM Manufacturing PMI pushed back expectations for swift cuts in the federal funds rate. Markets still expect the Fed to lower rates twice this year, potentially in June and October. Meanwhile, key labour market data due this week including the JOLTS survey and the monthly jobs report, will be delayed because of the partial US government shutdown. House Republican leaders are expected to vote on Tuesday on a government funding package already approved by the Senate. Separately, the US and India reached a new trade deal that will reduce tariffs on each other’s goods. The greenback weakened most against the Australian dollar after the Reserve Bank of Australia raised borrowing costs.

Dollar Steadies After 2-Day Rally

The South African rand strengthened further to around 16 per USD, lifted by the rebound in prices of precious metals, particularly gold and platinum, South Africa’s key exports. Kevin Warsh’s nomination by President Trump to replace Jerome Powell as Fed chair prompted a rapid selloff in precious metals, as traders swiftly adjusted positions amid concerns over the future of US monetary policy.

South African Rand Recovers Further Ground

The Indonesian rupiah firmed to about IDR 16,770 per dollar on Tuesday, snapping a three-session slide as solid external data lifted sentiment. Indonesia logged a robust 2025 trade surplus, underpinned by a 68th consecutive monthly surplus in December. Meanwhile, January’s relatively high inflation was largely base-effect driven, following electricity tariff discounts early last year, easing immediate policy concerns. Bank Indonesia recently reiterated its commitment to stabilizing the currency through spot and forward interventions alongside liquidity operations, while noting the rupiah is expected to recover gradually. However, upside was capped by prospects of further easing this year after 150bp cuts since September 2024, and caution ahead of Q4 GDP and January FX reserves data due later this week. Globally, the dollar index held near 97.5, supported by strong U.S. data and President Trump’s nomination of Kevin Warsh as the next Fed chair, a choice seen as relatively hawkish.

Rupiah Strengthens After Solid Trade Data

The Australian dollar rose to around $0.69 on Tuesday, ending a two-session decline, as the Reserve Bank of Australia implemented an expected interest rate hike. The central bank raised the cash rate by 25 bps to 3.85%, marking its first increase since November 2023 and positioning the RBA as the first major central bank to pivot from a post-COVID easing cycle to tightening. The decision was unanimous, reflecting a broad set of data in recent months indicating that inflationary pressures intensified in the second half of 2025 and are likely to remain above the target range for some time. The RBA also noted that private demand is growing faster than anticipated, capacity constraints are more pronounced than previously assessed, and labor market conditions remain relatively tight. Market attention now turns to Governor Michele Bullock’s post-meeting press conference, where her commentary and updated economic forecasts are expected to provide further insight into the RBA’s policy outlook.

Aussie Dollar Rebounds on RBA Rate Hike

The New Zealand dollar rose to around $0.601, rebounding after a two-day decline, as markets increasingly bet that the RBNZ will begin lifting rates later this year. Attention has now turned to labor market data due this week, with the Q4 unemployment rate expected to hold at 5.3%, its highest level since 2016, while employment is forecast to grow by 0.3%. While the data may justify delaying policy tightening until the second half of the year, above-target inflation and firming economic growth leave little doubt that the next policy move will be a rate hike. Policymakers meet on February 18, marking the first decision under new Governor Anna Breman, who is expected to outline her policy vision. Meanwhile, gains were capped by renewed strength in the US dollar after President Donald Trump nominated Kevin Warsh as Fed chair, a move markets view as hawkish and less supportive of aggressive rate cuts.

New Zealand Dollar Rebounds

The Japanese yen traded around 155.5 per dollar on Tuesday after falling for two straight sessions, as robust US economic data and the nomination of a hawkish Federal Reserve chief supported the dollar. The yen also faced downward pressure after Prime Minister Sanae Takaichi over the weekend described a weak yen as a potential opportunity for export industries, signaling support for a softer currency. She later clarified that her remarks were intended to promote an economy resilient to currency swings, while Finance Minister Satsuki Katayama noted that the PM was simply citing standard economic principles regarding a weak currency’s impact. The yen’s decline also comes ahead of the Feb. 8 snap lower house election, where Takaichi’s ruling party is expected to gain seats and pursue expansionary fiscal policies. Japanese government bonds and the yen fell last month amid expectations of fiscal stimulus, with ongoing tax cut discussions likely to further pressure public finances.

Yen Holds Losses on Dollar Strength

The South Korean won strengthened to around 1,448 per dollar, rebounding from recent losses, supported by signs of reduced trade-policy risk and stronger capital inflows. Sentiment improved after Prime Minister Kim Min-seok stated that Seoul and Washington are narrowing differences through direct talks with US Vice President JD Vance. While President Donald Trump recently warned of a potential tariff hike, later comments pointing to a negotiated outcome have eased concerns. Equities also supported the currency, as Korean stocks bounced sharply following a steep drop, as global markets stabilized. Domestic institutions were the main drivers of the rebound, while foreign funds added positions on a net basis, contributing to rising capital inflows and reinforcing demand for the currency. Investor attention also turned to domestic inflation, as consumer prices slowed in January, with both headline and core inflation at 2%, matching the Bank of Korea’s target and below last month’s pace.

Won Rises on Trade Progress, Equity Inflows

The dollar index steadied around 97.5 on Tuesday following a sharp two-day rebound, supported by strong US economic data and shifting expectations for Federal Reserve policy. Monday’s data showed a surprise expansion in US factory activity, signaling strength in the economy and corporate profits. Investors now turn to Friday’s monthly jobs report, though its release could be delayed by a partial government shutdown. The dollar’s recent rise began Friday after President Donald Trump nominated Kevin Warsh to succeed Fed Governor Jerome Powell, with markets viewing Warsh as a relatively hawkish pick who may favor lower interest rates but less aggressively than other candidates. Separately, Trump announced a trade deal with India that cuts tariffs on both sides in exchange for New Delhi halting purchases of Russian oil. Meanwhile, the greenback eased against antipodean currencies ahead of an expected Reserve Bank of Australia rate hike.

Dollar Holds Firm on Shifting Fed View

The Brazilian real weakened past 5.26 per US dollar, pulling back from its strongest levels since May 2024 as renewed US dollar strength and shifting global rate dynamics reduced support for high carry currencies. Externally, the move reflects the dollar’s rebound after January’s decline, driven by firmer US activity data and the nomination of Kevin Warsh as the next Federal Reserve chair, which reinforced expectations of tighter liquidity conditions and a more disciplined balance sheet approach, lifting US yields and increasing the opportunity cost of holding BRL. Domestically, while Copom has maintained the Selic at a restrictive 15%, policymakers have reiterated that any future easing will remain conditional on sustained disinflation and fiscal discipline, limiting expectations for additional upside from Brazil’s already well priced real yield advantage and offering little fresh support to the currency.

Brazilian Real Pulling Back From Mid-2024 Highs

The Indian rupee strengthened to 90.5 per USD, rebounding from the record-low of 92 touched on January 28th after the US lowered their tariffs against India. US President Trump and Indian Prime Minister Modi agreed on a deal to slash tariffs on India to 18% from the current level of 50% after Modi claimed that India would stop buying Russian oil. The moves were set to improve the export outlook for Indian textiles, machinery, and raw materials that are commonly shipped to the US, taming the imbalance in forex flows to India that pressured the currency in recent quarters. The rupee reached a record low last week as the rebound in oil prices increased domestic dollar demand for major energy importers. This was then magnified by the record-setting INR 17.2 trillion in borrowing penned in the new federal budget.

Indian Rupee Rebounds on Lower US Tariffs

The Mexican peso rebounded toward the 17.40 per US dollar level after three consecutive sessions of declines, largely reflecting a near-term correction following last week’s sharp selloff driven by a broad resurgence in the US dollar. The earlier drop was triggered by renewed USD strength after the nomination of Kevin Warsh as the next Federal Reserve chair and stronger US data lifted US yields and raised the opportunity cost of holding peso positions, prompting an unwinding of crowded carry trades. Domestically, the pullback was reinforced by evidence that Mexico’s growth momentum remains modest despite a Q4 rebound, cementing expectations that Banco de México will maintain a cautious easing path after cutting the policy rate to 7% in December, gradually narrowing the real yield differential that had underpinned the “superpeso.” Heavy profit-taking after January’s sharp appreciation further amplified the move.

Mexican Peso Rebounds

The Swiss franc weakened roughly 1% to around 0.78 per USD, the lowest in over a week, pressured by a stronger dollar on expectations that President Trump’s Fed nominee, Kevin Warsh, will avoid aggressive rate cuts, given his historical preference for a firmer dollar. Falling prices of precious metals also weighed on the currency, as Switzerland is a major gold refiner. At the same time, the franc’s appeal as a safe haven diminished after President Trump signaled optimism about a possible US-Iran agreement.

Swiss Franc at Over 1-Week Low

The dollar index climbed toward 97.5 on the first trading day of February, its highest level in more than a week, extending gains of over 0.7% from the previous session. The greenback rebounded after a losing January, as US President Donald Trump’s nomination of Kevin Warsh as the next Fed chair injected fresh uncertainty into the outlook for monetary policy. Markets view Warsh as a more hawkish pick who would favour lower interest rates, albeit less aggressively than some other potential candidates. He is also expected to rein in the Fed’s balance sheet, a move that typically supports the dollar by reducing liquidity in the financial system. The dollar also drew support from stronger-than-expected US. data, with the ISM manufacturing PMI unexpectedly rising to its highest level since 2022 in January. The greenback strengthened against the Japanese yen and also gained against the Swiss franc, the Canadian dollar and the euro.

Dollar Strengthens Further

The Canadian dollar weakened past 1.36 per US dollar, retreating from sixteen-month highs as weaker domestic growth signals and falling oil prices coincided with a renewed upswing in US dollar strength. Canadian momentum has softened after GDP was flat in November and goods producing industries contracted for a third time in four months led by ongoing manufacturing weakness, underscoring persistent excess supply and muted inflation pressure. This has reinforced expectations that the BoC can remain patient rather than adopt a more restrictive stance, particularly as labor market slack continues to build. At the same time, external support has faded as oil prices slid toward the low $60s per barrel amid easing geopolitical risk tied to US Iran talks, weakening Canada’s terms of trade. These pressures have been amplified by a firmer US dollar following Kevin Warsh’s nomination as Federal Reserve chair, which lifted demand for USD liquidity.

Breaking News

Follow what's happening with real-time updates from around the world.