The US dollar, which had strengthened in North America the previous day, experienced a broad decline today, losing ground against all G10 currencies. The Japanese yen led these gains, pushing the dollar below JPY150 for the first time in over two months. This movement reflects growing confidence in the Bank of Japan’s commitment to tightening monetary policy, despite a slightly softer swap market. Emerging market currencies are also showing strength, with the Mexican peso recovering after its first decline in seven sessions. Meanwhile, global financial markets are displaying mixed performances, with rising bond yields in Japan weighing on equities, while European stocks recover modestly.

Asia Pacific Markets

The Japanese yen strengthened against the dollar as speculation about monetary policy normalization gained traction. The Bank of Japan’s stance appears less controversial, and Tokyo has shown no strong resistance to a stronger currency. The dollar briefly dropped below JPY150 for the first time since early December, struggling to regain ground above JPY150.50. The narrowing US-Japan yield gap has not provided much support to the greenback.
On the Chinese front, the yuan remained relatively stable despite concerns over US tariffs. Contrary to expectations, Beijing has not devalued the currency but has instead maintained stability. Rising Chinese equities and a narrowing yield discount against the US have also contributed to the yuan’s resilience.

European Markets

The euro has experienced fluctuations, rising from $1.0280 to nearly $1.0515 before retracing its gains. It is currently stabilizing within a narrow range above $1.0420.
Meanwhile, the British pound has hovered around the $1.26 level for five consecutive sessions. Stronger wage growth and accelerating inflation have led markets to adjust expectations for a Bank of England rate cut, now fully pricing in a reduction by June. However, markets still anticipate 50 basis points in rate cuts by year-end.

American Markets

The US dollar has softened after reaching a four-day high near 107.40. A move beyond 107.50 could improve its technical outlook and indicate a potential reversal of the recent decline.
Economic data releases today include the Philadelphia Fed survey, jobless claims, and Leading Economic Indicators. The US labor market’s slowdown may accelerate, with federal layoffs potentially impacting unemployment filings in the coming weeks. The Federal Reserve is expected to keep rates steady through the first half of the year, with markets fully pricing in a rate cut by September. Some analysts see a higher probability of an additional cut before year-end.