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Forex Today: Gold, Silver shine as US Dollar sags amid thin trading conditions

Here is what you need to know on Monday, September 1:

The US Dollar Index (DXY) is on the defensive at the beginning of a new week and a month, extending its bearish momentum, despite a risk-averse market environment.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the British Pound.

USDEURGBPJPYCADAUDNZDCHF
USD-0.19%-0.22%-0.04%0.09%0.09%-0.09%-0.03%
EUR0.19%-0.03%0.09%0.29%0.28%0.10%0.16%
GBP0.22%0.03%0.00%0.32%0.31%0.13%0.24%
JPY0.04%-0.09%0.00%0.20%0.15%-0.01%0.05%
CAD-0.09%-0.29%-0.32%-0.20%0.00%-0.18%-0.08%
AUD-0.09%-0.28%-0.31%-0.15%-0.01%-0.18%-0.08%
NZD0.09%-0.10%-0.13%0.01%0.18%0.18%0.11%
CHF0.03%-0.16%-0.24%-0.05%0.08%0.08%-0.11%

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).

China’s private sector manufacturing activity unexpectedly returned to expansion in August, with a 50.5 reading, but the optimism is being offset by the trade quagmire and the tech sell-off on Wall Street indices last week.

The Japanese stocks tracked the Wall Street decline, sending the benchmark Nikkei 225 index as much as 2% lower on the day. Chinese indices were a mixed bag.

On Friday, a US court ruled that President Donald Trump’s global tariffs, unilaterally imposed, as largely illegal. However, US Trade Representative Jamieson Greer said in a Fox News interview on Sunday that the Trump administration will likely continue negotiations with its trade partners despite Friday’s US court ruling.

The Greenback also bears the brunt of increased dovish expectations surrounding the US Federal Reserve’s (Fed).

On Friday, in line with estimates US Core Personal Consumption Expenditures (PCE) Price Index - the Fed’s preferred inflation gauge, reaffirmed bets for an interest rate cut this month.

Markets now see a roughly 90% chance of the Fed lowering interest rates this month, according to the CME Group’s FedWatch Tool.

All eyes will be on a flurry of US employment data, including the critical Nonfarm Payrolls (NFP) on Friday, which will be closely scrutinized for the scope and the timing of the future Fed rate cuts.

EUR/USD trades firmer above 1.1700 in the European morning, while GBP/USD also grinds higher above 1.3500.

AUD/USD moves back and forth in a narrow range below 0.6550 while USD/CAD also oscillates around 1.3750 amid a broadly weaker US Dollar and falling Oil prices.

NZD/USD, however, bucks the side trend, currently posting moderate gains at around 0.5900.

USD/JPY made another attempt above 147.00 but sellers quickly jumped in to drag it back under that level, where it now wavers. The Japanese Yen (JPY) attracts haven demand amid a sell-off in Japanese equities.

Gold consolidates at five-month highs just below $3,490, looking for a fresh record high. Meanwhile, Silver hit the highest level since September 2011 above $40.50.

Risk sentiment FAQs

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

Author

Dhwani Mehta

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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