Forex Today: Dollar oversold but still weak

FXStreet Team FXStreet

Here is what you need to know on Monday, August 31:

The dollar plunged on Friday in the aftermaths of the US Powell’s announcement last week. The Federal Reserve shifted the monetary policy, putting more emphasis on employment and saying it could let inflation run beyond the 2.0% target.

Japanese PM Shinzo Abe resigned over health issues. After eight years leading the country, Abe´s decision to step down spurred risk aversion by the end of the week. Still, he said that he would continue to lead the country until a new PM is approved.

The Pound could suffer a setback at the beginning of the week, amid news indicating that UK’s Finance Minister Sunak is considering a set of tax increases to compensate coronavirus pandemic extraordinary expenses. However, other cabinet members opposed to such a move, but instead want to consider spending cuts.

Wall Street closed with gains, despite risk-aversion dominated the first half of the day, following Abe’s resignation. US Treasury yields eased in the last trading day of the week but closed it with gains.

Gold closed with gains around $1,964 a troy ounce, after falling in the previous two weeks. Crude oil prices remained stable.

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FXStreet Team

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Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.

AUD/USD hovers around 0.7000, over one-week low ahead of RBA decision

AUD/USD consolidates the previous day's losses to an over one-week low, holding steady around 0.7000 during the Asian session on Tuesday ahead of the RBA rate decision. Meanwhile, the US Dollar remains depressed as hopes for a diplomatic resolution to end the US-Iran war counter Fed hike bets amid market anxiety ahead of the US midterm elections, further supporting the currency pair.

USD/JPY fails near 159.00 amid weak USD, intervention risks

USD/JPY edges lower during Tuesday’s Asian session, reversing part of the previous day's gains to 158.00 as the US Dollar remains depressed amid hopes for Iran diplomacy and ahead of US midterm elections. Meanwhile, intervention risks support the Japanese Yen, though the uncertainty over the timing of the next BoJ rate hike caps gains. This keeps the pair confined within a familiar range and warrants caution before placing directional bets.

Gold consolidates near $3,950 as Fed hike bets counter weak USD ahead of US elections

Gold holds steady around $3,950 through Tuesday’s Asian session, consolidating the previous day's recovery gains from the lowest level since October 2025, touched last week. Hopes for Iran optimism keep the safe-haven US Dollar depressed, which, along with anxiety ahead of US midterm elections, supports the bullion. However, Fed rate-hike bets and a modest bounce in US bond yields cap gains for the non-yielding yellow metal.

RBA expected to raise interest rate to 4.85%

The Reserve Bank of Australia will announce its monetary policy decision on Tuesday and is widely anticipated to raise the Official Cash Rate by 25 basis points to 4.85% from 4.6%. If the RBA delivers as expected, it will be the fifth interest rate hike of 2026, and the OCR will hit an 18-year high.

Strong iPhone sales fortify Apple's Q4 result

A robust fourth-quarter for Apple's iPhone sales helped the tech titan beat Wall Street's consensus on Monday. Apple reported $57.58 billion in iPhone sales in Q4, beating the average analyst estimate by more than a billion. However, AAPL stock shed close to 4% afterhours despite the top and bottom line beat.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.