The Japanese yen was the weakest major currency against the broadly softer US dollar on Monday as investors waited for any sign of official buying from Tokyo to slow the currency’s slide.

A national holiday in Japan reduced liquidity during the Asian session, keeping the yen down 0.3% at 156.89 per dollar and close to the ten-month low it hit last week.

The yen continues to face pressure from a combination of highly accommodative fiscal policy and some of the lowest interest rates in the world. It found brief support on Friday after rebounding from ten-month lows, following stronger verbal warnings from Finance Minister Satsuki Katayama.

Traders see a risk of official intervention somewhere between 158 and 162 per dollar, with the thin liquidity expected during the US Thanksgiving holiday later this week viewed as a potential window for action.

Nick Rees, head of macroeconomic research at Monex Europe, said: “The yen is currently caught between two forces: short-term rates are rising as the Bank of Japan continues tightening, while the long end of the yield curve is being pushed higher by broader financial-risk concerns.”

Rees added that markets are focusing more on Japan’s long-term structural risks rather than the short-term implications for the currency.

Takouji Aida, a private-sector member of a key government committee, told NHK on Sunday that Japan is capable of intervening actively in FX markets to mitigate the economic damage from a weak yen.

Rees noted that any intervention might slow USD/JPY’s climb but is unlikely to reverse it entirely, given that the fundamental forces behind the trend remain intact.

Euro rises as sterling holds steady ahead of UK budget

Elsewhere in FX markets, the euro rose 0.2% to 1.1531 dollars as traders renewed bets on a December Fed rate cut following comments from New York Fed President John Williams, who said there is room for further easing in the near term.

The euro showed little initial reaction to the updated peace-framework discussions between Kyiv and Washington, which build on and modify last week’s 28-point proposal.

The dollar index was steady at 100.15, with most major currencies hovering near recent lows.

Sterling was little changed at 1.3095 dollars ahead of Wednesday’s UK budget, where Finance Minister Rachel Reeves is expected to balance support for a slowing economy with demonstrating fiscal discipline.

The New Zealand dollar held at 0.5608 dollars after an 8% slide since July due to weakening economic prospects. Markets are almost fully pricing a 25-basis-point RBNZ rate cut on Wednesday, while expectations for another cut next year remain uncertain.

The Australian dollar traded at 0.6457 dollars as investors awaited Wednesday’s CPI release — the first full monthly inflation report. A Reuters poll showed core inflation likely holding at 3.6%.

Peter Dragicevich, APAC currency strategist at payments company Corpay, said: “A result like this, in our view, would reinforce the idea that the Reserve Bank of Australia may not cut rates again in this cycle.”

Gold prices rose in European trading on Monday, moving into positive territory for the first time in three sessions as the US dollar’s advance paused in the foreign-exchange market.

The shift came after less hawkish comments from several Federal Reserve officials boosted expectations for a December rate cut, ahead of Tuesday’s delayed US inflation data.

Price Overview

• Gold prices today: Gold climbed 0.35% to 4,077.74 dollars from an opening level of 4,065.23 dollars, after touching a low of 4,040.25 dollars.

• On Friday, gold slipped 0.3%, marking a second straight daily loss under pressure from a stronger US dollar.

• For the week, gold fell 0.5%, its fourth weekly decline in five weeks, amid weakening investment demand.

US Dollar

The dollar index dipped 0.1% on Monday, retreating from a six-month high of 100.40, reflecting a pause in US dollar strength against major and minor currencies.

Beyond profit-taking, the dollar eased as expectations grew for a December Fed rate cut.

US Interest Rates

• New York Fed President John Williams said Friday he expects the central bank to lower its policy rate from here, noting labor-market weakness poses a bigger economic threat than elevated inflation.

• Following his remarks, CME’s FedWatch tool showed market pricing for a 25-basis-point rate cut in December rising from 43% to 70%, while odds of no change fell from 57% to 30%.

• Investors now await Tuesday's release of delayed US September inflation data to refine these expectations.

Gold Outlook

Senior analyst Jigar Trivedi of Reliance Securities said the dollar index remains elevated near its six-month highs above 100, and sustained trading above this level would place additional pressure on gold.

He added that gold is likely to trend lower over the next three to five weeks, given a lack of strong catalysts for bulls and an absence of significant geopolitical tensions.

SPDR

Holdings in SPDR Gold Trust, the world’s largest gold-backed ETF, rose 1.14 metric tons on Friday to 1,040.57 metric tons, rebounding from 1,039.43 metric tons — the lowest level since 11 November.

The euro rose in European trading on Monday against a basket of major currencies, attempting to recover from a two-week low against the US dollar, supported by bargain-hunting at lower levels and by a pause in the dollar’s recent advance ahead of key US inflation data.

With uncertainty still surrounding the likelihood of a European Central Bank rate cut in December, investors are awaiting a closely watched speech later today from ECB President Christine Lagarde, which is expected to offer new clues on the eurozone’s monetary-policy path.

Price Overview

• EUR/USD rose 0.15% to 1.1528$, up from an opening level of 1.1511$, after touching a session low of 1.1502$.

• The euro ended Friday’s session down 0.15% against the dollar, marking a sixth straight daily loss and hitting a two-week low at 1.1491$, pressured by weak industrial and services data across Europe.

• For the week, the euro fell 0.95% — its biggest weekly decline since late July — as investors concentrated on buying the US dollar as the most attractive asset in the current environment.

US Dollar

The dollar index dipped 0.1% on Monday, pulling back from a six-month high at 100.40, reflecting a pause in the American currency’s upward momentum.

Beyond profit-taking, investors are reluctant to build new long positions ahead of key US inflation data, which is expected to offer clearer evidence on whether the Federal Reserve will maintain rates unchanged in December.

European Rates

• Market pricing currently reflects around a 25% probability of a 25-basis-point ECB rate cut in December.

• Investors are awaiting additional eurozone data on inflation, unemployment, and wages to reassess these expectations.

• ECB President Christine Lagarde will deliver a key speech later today, expected to cover recent inflation developments and the outlook for European interest rates.

Outlook for the Euro

• According to Economies.com: if Lagarde’s comments sound less hawkish, expectations for a December ECB rate cut would strengthen, placing additional downward pressure on the euro against a basket of currencies.

The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, resuming its decline after a brief pause in the previous session against the US dollar, and moving once again toward its lowest levels in ten months. The currency remains under clear pressure amid persistent concerns over the stimulus-heavy policies of Prime Minister Sanae Takaichi.

At the same time, analysts see little chance of direct intervention to support the yen before it reaches 160 per dollar. Investors are also awaiting additional clues on the Bank of Japan’s path toward policy normalization and potential rate hikes.

Price Overview

• USD/JPY rose about 0.3% to 156.80¥ from an opening level of 156.37¥, after touching a session low of 156.37¥.

• The yen ended Friday’s session with a 0.7% gain against the dollar — its first advance in six days — supported by bargain-buying after hitting a ten-month low of 157.89 the day before.

• The currency lost 1.2% last week, marking a second consecutive weekly decline, pressured by Takaichi’s stimulus package.

Takaichi’s Stimulus Policies

Japan’s cabinet, led by Sanae Takaichi, approved a 21-trillion-yen (135-billion-dollar) economic stimulus package late last week — the administration’s first major policy initiative. The program reflects her expansionary fiscal approach aimed at supporting Japan’s sluggish economic activity.

The package includes 17.7 trillion yen in general-account spending, far exceeding last year’s 13.9 trillion yen, making it the largest stimulus since the COVID-19 pandemic. It also features 2.7 trillion yen in tax cuts. The government plans to approve a supplementary budget on 28 November to secure parliamentary approval before year-end.

Views and Analysis

• Christopher Wong, FX strategist at OCBC, said intervention is not off the table before USD/JPY reaches 160, adding that any move could be sharp given thin liquidity conditions.

• Michael Boutros, chief strategist at StoneX, noted an ongoing tug of war between the Bank of Japan and the new prime minister, who is “highly pro-business and wants markets to remain very comfortable.”

• Boutros added: “I don’t think they will move on rates anytime soon. What we may see instead is talk of intervention and more warnings as these moves continue.”

Japanese Interest Rates

• The market currently prices a roughly 35% chance of a 25-basis-point BOJ rate hike in December.

• To reassess these probabilities, investors are watching upcoming data on inflation, unemployment, and wage growth in Japan.