The euro rose in European trading on Tuesday against a basket of global currencies, extending its gains for a second consecutive day against the US dollar and hitting a one-week high, supported by continued selling of the US currency in the foreign exchange market ahead of the Christmas holidays.

The single currency was also supported by declining expectations that the European Central Bank will cut interest rates in February 2026, particularly amid recent improvements in economic activity across the euro area, alongside expectations that this improvement will continue as downside risks ease.

Price overview

Euro exchange rate today: the euro rose 0.2% against the dollar to $1.1780, its highest level in a week, from an opening level of $1.1759, after touching an intraday low of $1.1753.

The euro ended Monday’s session up 0.45% against the dollar, marking its first gain in five days, amid active selling of the US currency.

US dollar

The dollar index fell 0.2% on Tuesday, deepening losses for a second straight session and hitting a one-week low, reflecting continued weakness in the US currency against a basket of major and minor currencies.

The decline comes amid increased dollar selling ahead of the Christmas and New Year holidays, and under pressure from cautious comments by some Federal Reserve officials, which highlighted growing concern over weakness in US labor market indicators.

European interest rates

In line with expectations, the European Central Bank kept its key interest rates unchanged last week at 2.15%, the lowest level since October 2022, marking the fourth consecutive meeting with no change.

The ECB reaffirmed its data-dependent, meeting-by-meeting approach, without committing to a specific interest rate path, noting that current rates are appropriate given stable inflation and economic growth.

ECB President Christine Lagarde said the bank remains in a “good position” and stressed that there is consensus within the Governing Council to keep all options open, including the possibility of raising rates if necessary.

Money market pricing for a 25-basis-point interest rate cut by the ECB in February 2026 currently remains below 10%.

To reprice these expectations, investors are awaiting further euro area economic data on inflation, unemployment, and wage growth.

The Japanese yen rose in Asian trading on Tuesday against a basket of major and minor currencies, extending its gains for a second consecutive day against the US dollar, as it continued to recover from four-week lows, following a strongly worded warning from Japanese authorities signaling Tokyo’s readiness to intervene to support the local currency.

Finance Minister Satsuki Katayama said Japan has full freedom to take whatever action it deems necessary to address excessive volatility in the yen, stressing that recent moves in the currency do not reflect market fundamentals at all.

A former Bank of Japan official said that rising yields pose the biggest risk to the Japanese economy in 2026, warning that the central bank may be forced to review its quantitative easing tapering plan if the bond market downturn persists.

Price overview

Japanese yen exchange rate today: the dollar fell 0.7% against the yen to ¥155.96, from an opening level of ¥157.02, after recording an intraday high of ¥157.04.

The yen ended Monday’s session up 0.45% against the dollar, as part of its recovery from a four-week low of ¥157.77, following warnings from Japanese government officials about possible intervention in the foreign exchange market.

Japanese finance minister

Japanese Finance Minister Satsuki Katayama said on Monday that Japan has “freedom of action” to take bold measures to deal with excessive volatility in the yen.

Speaking at a press conference on Tuesday, Katayama said recent movements in the local currency do not reflect market fundamentals at all, but are driven by speculation, giving Tokyo justification to intervene in the market if necessary.

She added that the government will take appropriate measures to counter excessive moves, in line with Japan’s agreement with the United States in September on exchange rate policy.

Key comments

Seiji Adachi, a former Bank of Japan official, told Reuters that Japan could face further yen weakness and a continued rise in bond yields, driven by market concerns over the new government’s expansionary fiscal policy.

Adachi explained that the yen is weakening despite the narrowing interest rate gap between Japan and the United States, suggesting that the move is not closely linked to Bank of Japan policy.

He added that investors appear to be demanding a higher premium for Japan’s fiscal risks, a trend also evident in the recent rise in Japanese government bond yields.

The benchmark 10-year Japanese government bond yield hit a 27-year high of 2.1% on Monday, reflecting expectations of further Bank of Japan rate hikes and large bond issuance.

Adachi said the Bank of Japan could ultimately raise interest rates to 1.5%, with the next increase likely in July next year.

Japanese interest rates

Market pricing for a quarter-point interest rate hike by the Bank of Japan at its January meeting remains below 20%.

To reprice those expectations, investors are awaiting further data on inflation, unemployment, and wage growth in Japan.

Soybean prices on the Chicago Board of Trade edged slightly higher on Monday, as the market caught its breath after last week’s losses that pushed prices to their weakest levels since late October, amid uncertainty over demand from China, the world’s largest importer.

Wheat continued to post additional gains, supported by buying on dips, although abundant global supplies are likely to cap prices. A Singapore-based trader said: “Chinese buying was largely driven by the US-China trade agreement. Chinese demand for imported soybeans remains limited due to ample supplies in the domestic market.”

Uncertainty over when China will fulfill its target of purchasing 12 million metric tons of US soybeans, stipulated under a trade truce between Beijing and Washington, has weighed on the market, particularly as a bumper harvest is expected in Brazil early in 2026. China did not import any US soybean shipments for the third consecutive month in November, as buyers turned to South American supplies amid concerns about potential shortages should the trade war persist.

Following the truce reached in October, China stepped up purchases of US shipments, with traders saying more than 7 million tons have been bought since then.

On Friday morning, exporters sold 134,000 tons of US soybeans to China, according to the US Department of Agriculture’s daily reporting system.

In other grain markets, large wheat crops in Argentina and Australia are adding fresh supplies to the global market. Early outlooks for next year’s crops also appear favorable, with Russia, the world’s largest exporter, forecasting a strong harvest of 90 million tons, according to officials last week.

Ukraine’s economy ministry said on Friday that Ukrainian farmers had threshed about 56.6 million tons of grain from 93.5% of the planted area as of December 18, without providing comparative data.

Regulatory data released on Friday showed that large speculators increased their net short positions in Chicago corn futures during the week ended December 9.

The US Commodity Futures Trading Commission’s weekly Commitments of Traders report also showed that non-commercial traders, a category that includes hedge funds, increased their net short positions in wheat contracts, while reducing their net long positions in soybeans.

Corn

March corn futures rose 0.7% at the close to $4.47 per bushel.

Soybeans

January soybean futures gained 0.3% to $10.53 per bushel.

Wheat

March wheat futures climbed 1.1% to $5.15 per bushel.

Most cryptocurrencies edged lower during Monday’s trading, as investors turned toward safe-haven assets amid geopolitical concerns following US President Donald Trump’s announcement last week of a blockade on all sanctioned oil tankers entering or leaving Venezuela.

CNBC reported, citing sources familiar with the matter, that President Trump may announce his nominee for Federal Reserve chair by early January.

Wall Street’s stock and bond markets are set to close this coming Thursday, as the United States and several countries around the world observe the Christmas holiday.

Ethereum

In market trading, Ethereum fell 0.7% to $2,970.4 as of 20:35 GMT on the CoinMarketCap platform.