Dollar gyrations but little changed ahead of the North American session

The market extended the greenback’s recovery when Treasury Secretary Bessent told the CNBC audience that the US always supports a strong dollar. However, the market was not fully buying it from the administration, which seemed to offer verbal support for Japan at the end of last week, and the president saying he was unconcerned about the dollar that had been selling off hard and continued to call for lower interest rates. 

Although there was some volatility after the unsurprising FOMC meeting and fairly uneventful press conference, the upside dollar correction momentum seen earlier in the day had all but disappeared by the close. Follow-through selling initially extended the dollar’s losses, but it recovered and now is little changed in late European morning turnover. The intraday momentum indicators are overextended, and the North American market showed a penchant to sell the dollar after the FOMC meeting. Meanwhile, the US “armada” is amassing near Iran, and this is the source of immediate geopolitical tensions that has lifted oil prices to four-month highs.

Prices  

G10

The euro’s pullback extended after the Federal Reserve’s statement and decision to keep policy unchanged. The euro briefly traded below $1.19 before buyers emerged. It recovered to a little through $1.1950 before the North American close. It reached almost $1.20 in Asia Pacific turnover but slipped back slightly below $1.1940 in Europe. Intraday momentum indicators are stretched as the North American session is about to begin. 

The dollar poked above JPY154.00 after the FOMC announcement and pulled back to around JPY153.20. It fell to nearly JPY152.75 in today’s local session. The low of the past two sessions is JPY152.10-20. The greenback recovered in Europe to approach JPY153.50. 

After near $1.3850 in early Asia Pacific activity yesterday, sterling fell to about $1.3750 in the North American morning, as the dollar recovered on Bessent’s comments. It retested the low after the FOMC statement and rebounded to around $1.3810. Follow-through buying lifted it back to almost $1.3850 today where it stalled. It has been sold to around $1.3780 in Europe, leaving intraday momentum indicators overextended.

The greenback fell to almost CAD1.3535 in the North American morning yesterday, which is a few hundredths of a Canadian cent below last year’s low. It recovered to almost CAD1.3610 before settling a little above CAD1.3555. The US dollar fell to CAD1.3510 in the Asia Pacific session but the rebound as seen it return to the CAD1.3560 area. There may be a little more room on the upside, but it will likely be exhausted before CAD1.3580. 

The Australian dollar spent most of the North American session between about $0.6980 and $0.7000. As greenback softened post-Fed, the Aussie pushed up to almost $0.7045 in late dealings. It reached nearly $0.7095 in Asia Pacific turnover before reversing lower and returned toward low the lows seen around $0.7020. 

The strength of the Swiss franc may cause the central bank some consternation. That franc is at its lowest level against the dollar in more than a decade is troublesome, but officials tend to be more focused on the cross against the euro. The euro fell to its lowest level since 2015 against the Swiss franc yesterday, near CHF0.9155. The Swiss deposit rate is already at zero, and the two-year note yield is minus 20 bp. The dollar and euro held yesterday’s lows so far today. 

EM

The dollar held above MXN17.14 in North America and set the session high near midday in NY near MXN17.26. Wednesday’s session low (according to Bloomberg data was in a very quiet period a couple of hours after North American markets closed but before Asia Pacific liquidity emerged (MXN17.1055). The greenback settled slightly below MXN17.19. It is trading quietly today in a roughly MXN17.1115-MXN17.2050 range.

The dollar continues to consolidate against the offshore yuan. The low was set on Tuesday near CNH6.9315. Since then, the greenback has held below CNH6.95. The PBOC set the dollar’s fix at CNY6.771 today (CNY6.9755 yesterday. When the reference rate is set lower it is most often a large change than when the reference rate is set higher. 

Despite firmer equities, the Indian rupee fell to a record low today. The dollar rose above INR92.00. The central bank intervened but market participants were not impressed. A combination of foreign selling and exporters are reluctant to repatriate.

The dollar fell to almost BRL5.17, its lowest level since May 2024. At widely expected the central bank kept the Selic Rate at 15.00% but indicated it would begin cutting rates at its next meeting (March 18)

Other markets 

Global equities are mostly firmer. Taiwan was the notable exception in the Asia Pacific region among the large bourses. The pressure on Indonesia continued amid concerns that MSCI could reclassify it as a frontier market. Europe’s Stoxx 600 is recouping almost half of yesterday’s 0.75% drop. US index futures enjoy a firmer tone. 

Benchmark 10-year yields are mixed. While the 10-year JGB yield edged higher, the 30- and 40-year yields slipped. European benchmark yields are slightly softer today, while the US 10-year is firm at 4.25%. As widely expected Sweden's Riksbank kept its deposit rate at 1.75% and confirmed its extended pause.  

Gold and silver continued their record runs. Gold reached almost $5600 but is a little above $5500 as the North American session is about to begin. Silver briefly traded north of $120 but has pulled back to near $117. It settled near $116.70 yesterday. 

US threats on Iran have seen March WTI jump to $65 a barrel. The low for the week was set Tuesday near $60.15. It is the highest level since last September. 

Data

With the US economic growth apparently accelerating in Q4 25 and price pressures firm, it is hardly surprising that the Fed stood pat yesterday. The limited Fed funds futures and interest rate response to the FOMC decision and the press conference suggests the Fed delivered what was expected. The Atlanta Fed GDP tracker is for 5.4% growth in Q4. The model and bank economists will likely fine tune GDP projections after today’s data, which include November trade, factory orders, and wholesale inventories. US trade balance has been distorted by gaming tariffs and precious metal trade. That said, the deficit likely grew in November for the first time in four months. We already know that durable goods orders were flattered by Boeing orders, and this will likely be picked up in the factory goods orders. Wholesale inventories are expected to have risen for the third consecutive month in November. rose by 0.2% in November. Weekly jobless claims may have posted their first back-to-back gain since late September/early October. January nonfarm payrolls will be reported next Friday, February 6. Early forecasts have crept up to about 70k (50k in December). 

As widely anticipated, the Bank of Canada kept policy unchanged at yesterday’s meeting. Today StatsCan reports November’s merchandise trade. Owing to disruptions emanating from the US, Canada’s trade balance deteriorated sharply in 2025. The merchandise trade deficit was about C$8.3 bln in the first ten months of 2024. It widened to C$28.7 bln in Jan-Oct 2026. Prime Minister Carney, who enjoys strong support in the polls, has been on a campaign to diversify Canada’s trade. 

Eurozone money supply M3 slowed to 2.8% year-over-year in December from 3.0% in November. Lending figures showed loans to households rose 3% in the year, slightly faster than November. Lending to non-financial businesses also rose 3% but that is slightly slower than in the previous month. Note that tomorrow, the first estimate of Q4 GDP is due. The regional economy is expected to have grown by 0.2% after 0.3% in Q3. 

Weekly portfolio flow data (covering the week through January 23) from the Japan’s Ministry of Finance shows Japanese investors bought foreign bonds for the second time in four weeks, while they sold foreign equities for the first time in four weeks. For their part, foreign investors sold Japanese bonds after being net buyers the previous three weeks. Note that given the interest rate differentials and cross-currency basis swap, the currency component of the transaction could be the key to the return of dollar-based investors. Foreign investors bought Japanese stocks for the fifth consecutive week.