The euro declined in European trading on Friday against a basket of global currencies, extending its losses for a fifth consecutive session against the US dollar and hitting its weakest level in five weeks. The single currency is now on track for its biggest weekly loss since March, as investors continue favoring the US dollar as the best available investment, particularly amid growing expectations that the Federal Reserve could raise interest rates this year in an effort to contain mounting inflationary pressures in the United States.

This week also saw markets increase pricing for a potential European rate hike in June, while traders continue waiting for additional economic data from the eurozone to reassess those expectations.

Price overview

• EUR/USD today: The euro fell 0.2% against the dollar to $1.1646, its lowest level since April 8, after opening at $1.1669 and touching an intraday high of $1.1673.

• The euro ended Thursday down 0.35% against the dollar, marking its fourth consecutive daily loss following another sharp rise in US Treasury yields.

Weekly performance

Over the course of this week’s trading, which officially concludes with Friday’s settlement, the single European currency has fallen around 1.2% against the US dollar so far. The euro is now on track for its first weekly loss in the past three weeks and its biggest weekly decline since March.

US dollar

The US dollar index rose 0.25% on Friday, extending gains for a fifth straight session and hitting its highest level in five weeks, reflecting continued broad strength in the US currency against a basket of global currencies.

The dollar received additional support from rising US Treasury yields as investors increased bets that the Federal Reserve will raise interest rates at least once this year.

US data released this week showed consumer prices in April rose at the fastest pace in three years, while producer prices recorded their biggest increase in four years, highlighting renewed inflationary pressure on Federal Reserve policymakers.

According to the CME FedWatch Tool, markets are currently pricing in a 45% probability of a Federal Reserve rate hike in December, compared with just over 16% a week ago.

European interest rates

• With global oil prices rising this week, money markets increased pricing for a 25-basis-point European Central Bank rate hike in June from 45% to 50%.

• Investors are now awaiting additional eurozone data on inflation, unemployment, and wages in order to reassess those expectations further.

The Japanese yen fell in Asian trading on Friday against a basket of major and minor currencies, extending its losses for a fifth straight session against the US dollar and hitting its weakest level in two weeks. The currency is now on track for its biggest weekly loss since March, as investors continue favoring the US dollar as the best available investment, particularly amid growing expectations that the Federal Reserve could raise interest rates this year to contain mounting inflationary pressures in the United States.

Government data released Friday in Japan showed producer prices rose in April at the fastest pace in three years, driven by higher oil and fuel costs resulting from the war with Iran. The figures reinforced expectations that the Bank of Japan could raise interest rates as soon as its June meeting.

Price overview

• USD/JPY today: The dollar rose 0.15% against the yen to ¥158.59, the highest level since April 30, after opening at ¥158.36 and touching an intraday low of ¥158.26.

• The yen ended Thursday down 0.3% against the dollar, marking its fourth consecutive daily loss due to rising US Treasury yields.

Weekly performance

Over the course of this week’s trading, which officially concludes with Friday’s settlement, the Japanese yen has declined 1.25% against the US dollar so far. It is on track for its first weekly loss in the past three weeks and its biggest weekly decline since March.

Japanese authorities

Japanese Finance Minister Satsuki Katayama confirmed following this week’s meeting with US Treasury Secretary Scott Bessent that both sides are “fully aligned” regarding currency market movements.

The US side also reaffirmed that coordination remains strong to address any “excessive and undesirable” volatility in the foreign exchange market, effectively giving Japan an implicit green light for further intervention if needed.

Katayama had previously issued strong warnings against “speculative and excessive” currency moves and hinted at “decisive action” while urging markets to remain on high alert.

US dollar

The US dollar index rose 0.25% on Friday, extending gains for a fifth straight session and hitting its highest level in five weeks, reflecting broad-based strength in the US currency against a basket of global currencies.

The dollar received additional support from rising US Treasury yields as investors increased bets that the Federal Reserve will raise interest rates at least once this year.

US data released this week showed consumer prices in April rose at the fastest pace in three years, while producer prices recorded their biggest increase in four years, highlighting renewed inflationary pressure on Federal Reserve policymakers.

According to the CME FedWatch Tool, markets are now pricing in a 45% probability of a Federal Reserve rate hike in December, up sharply from just over 16% a week ago.

Japan producer prices

Data released Friday in Tokyo showed Japan’s producer price index rose 4.9% year-over-year in April, marking the fastest annual increase since May 2023 and exceeding market expectations for a 3.0% rise. The figure accelerated sharply from a 2.9% increase recorded in March.

The data followed calls from a Bank of Japan policymaker to raise interest rates “as soon as possible” due to higher fuel costs linked to the Middle East war and the resulting increase in price pressures.

Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, said: “Today’s inflation data was stronger than expected, so markets have largely priced in a Japanese rate hike in June.”

Japanese interest rates

• Following the latest data, markets raised the probability of a quarter-point Bank of Japan rate hike at the June meeting from 60% to 75%.

• Investors are now awaiting additional data on inflation, unemployment, and wages in Japan to further reassess those expectations.

• The Bank of Japan’s Summary of Opinions released this week showed a clear shift toward tighter monetary policy and preparation for an earlier rate hike, driven by rising inflation risks linked to the Middle East crisis and the Iranian war.

Oil prices held near the $100 level on Thursday after the White House announced that US President Donald Trump and Chinese President Xi Jinping agreed on the importance of keeping the Strait of Hormuz open.

Global benchmark Brent crude futures for July delivery fell 58 cents to $105.05 per barrel by 9:36 a.m. Eastern Time, while US West Texas Intermediate crude futures for June delivery declined 46 cents to $100.56 per barrel.

A White House official said in a statement Thursday: “Both sides agreed that the Strait of Hormuz should remain open to support the free flow of energy,” adding that “President Xi also expressed China’s opposition to the militarization of the strait or the imposition of transit fees for its use.”

The official added that Xi showed interest in purchasing US oil, although Chinese state media did not mention any discussions regarding the Strait of Hormuz or oil purchases.

China’s state-run Xinhua News Agency reported that Trump and Xi “exchanged views on major international and regional issues, including developments in the Middle East.”

OPEC and IEA forecasts

OPEC and the International Energy Agency on Tuesday released their latest assessments of the Iranian war’s impact on the oil market.

OPEC lowered its forecast for global oil demand growth in 2026 to around 1.2 million barrels per day, down from a previous estimate of 1.4 million barrels per day, according to its latest monthly report.

The data also showed that the group’s oil production fell by 1.7 million barrels per day in April and has declined by more than 30%, or 9.7 million barrels per day, since the outbreak of the Iranian war in late February.

This report is expected to be the final OPEC report to include data from the UAE following its exit from the organization on May 1.

Meanwhile, the International Energy Agency said: “More than ten weeks after the outbreak of the Middle East war, growing supply disruptions through the Strait of Hormuz are draining global oil inventories at a record pace.”

The agency added that supply losses from Gulf producers have exceeded 14 million barrels per day, pushing total lost supply above one billion barrels, while warning that price volatility is likely to intensify as peak summer demand approaches.

ING analysts said in a note that “the duration of elevated fuel prices remains widely debated and is closely tied to geopolitical developments surrounding the closure of the Strait of Hormuz, as well as the risk of further damage to oil and gas infrastructure in the Middle East as the conflict escalates.”

Taiwan’s liquefied natural gas crisis has shifted from a debate about energy diversification into a real test of the island’s energy security. Taiwan relies on imports for 99% of its natural gas needs, and during 2025 around one-third of its 23.6 million tons of LNG imports came from the Gulf region — mainly Qatar, which supplied roughly 8 million tons, in addition to 200,000 tons from the UAE.

But with Qatari gas production halted and the Strait of Hormuz effectively closed, LNG tankers already loaded with cargo became trapped inside the Gulf, leaving Taiwan without any gas shipments from Qatar or the UAE during April and May. For an economy where gas-fired power plants generate nearly half of total electricity output, this represents a direct blow to the fuel that was supposed to make the power grid cleaner, more flexible, and more secure.

Despite the severity of the situation, the crisis has not yet fully appeared in the import figures. Taiwan imported 1.9 million tons of LNG in April, close to last year’s levels, although lower than the 2.03 million tons imported in March. Much of this apparent stability came from a record surge in US supplies, as American LNG shipments jumped from around 200,000 tons in March to 700,000 tons in April — the largest monthly volume of US gas imports in Taiwan’s history.

The United States has effectively become Taiwan’s emergency supply line, but spot cargoes do not offer the same stability as long-term Qatari contracts. They are also more expensive and far more exposed to global competition and price volatility.

Australia remains the second pillar of Taiwan’s gas supply network. Taiwan imported around 8 million tons of Australian LNG in 2025, and these volumes have remained stable over the past three years thanks to long-term contracts. However, Australia cannot fully replace the missing Gulf supply, especially with mounting domestic pressure on gas availability and Canberra’s decision to reserve 20% of gas exports for the domestic market starting in 2027.

Taiwan’s state-owned CPC Corporation, which handles LNG imports, confirmed it is trying to reduce dependence on the Middle East after signing a new US contract that will provide an additional 1.2 million tons annually. However, this remains a medium-term solution and cannot quickly replace lost Gulf shipments.

Although Russian gas could theoretically provide a practical alternative, Taiwanese authorities are avoiding that option for political reasons. Taiwan imported four cargoes from Russia’s Yamal project in 2025 totaling 350,000 tons, but it currently has no plans to increase Russian imports, despite having imported between 1.8 and 2 million tons annually from Russia before the Ukraine war.

The impact of the crisis is becoming increasingly visible in Taiwan’s electricity market. Monthly power generation averaged around 24.1 terawatt-hours during 2025, with gas-fired plants accounting for roughly 50% of that output. Of Taiwan’s total LNG consumption of 23.8 million tons, around 20 million tons go directly toward electricity generation, representing about 85.5% of total LNG usage.

If the loss of Qatari and Emirati shipments continues without stable replacements starting in June, Taiwan could lose more than 2 terawatt-hours of electricity generation per month — nearly 10% of total monthly demand. That could force difficult decisions regarding electricity allocation priorities, particularly during peak summer consumption.

The situation is further complicated by Taiwan’s broader energy transition strategy. The island had planned to phase out coal gradually, targeting an energy mix of 20% renewables, 30% coal, and 50% gas by 2025, while halting the construction of new coal-fired plants. But the fuel intended to replace coal — natural gas — is now itself in short supply.

As a result, coal has re-emerged as the most realistic emergency solution, similar to what is happening across several Asian economies. Coal plants currently account for about 35% of Taiwan’s electricity generation, while four units at the Hsinta power station, with combined capacity of roughly 2 gigawatts, were placed into emergency standby mode between 2023 and 2025. Those units can now generate around 1 terawatt-hour per month to offset part of the gas shortage.

Yet coal is far from a perfect solution. Taiwan’s coal imports fell to 4.5 million tons in April, the lowest level in five years, while Australian coal prices rose 25% year-over-year to $130 per ton. Taiwan is also competing with China and Japan for alternative coal supplies amid the broader global gas crisis.

Nuclear power, which was supposed to provide a strategic long-term solution, will not be ready in time. Taiwan’s state utility has proposed restarting the Kuosheng and Maanshan nuclear plants, which were shut down after their operating licenses expired in 2023 and 2025. If fully restarted, the four reactors could add around 30 terawatt-hours annually, but a full restart before 2028 appears unrealistic.

As a result, Taiwan now finds itself in a fragile position, relying on a patchwork of emergency US LNG shipments, limited Australian contracts, reserve coal stations, and a delayed nuclear option.

Authorities insist supplies are secured through September via spot purchases and Australian contracts, but media reports indicated official gas reserves were equivalent to only 11 days of consumption in early May, highlighting how narrow the safety margin has become.

The danger extends far beyond rising energy prices. Taiwan’s economy depends heavily on semiconductor manufacturing and solar panel production — two industries critical to the global economy and the clean energy transition. If the crisis worsens, industrial users are likely to face power rationing first, as governments typically prioritize households and residential consumers, potentially triggering another global semiconductor supply shock.

Taiwan’s energy transition over recent years was built around natural gas as a cleaner and more sustainable alternative to coal. But the Hormuz crisis is now exposing the scale of the risks embedded in that strategy.