The US dollar traded mostly stable against major currencies on Wednesday, while the Japanese yen fell to a two-week low versus the dollar, pressured by renewed uncertainty over the Bank of Japan’s policy path and rising tensions with China, as investors monitored global risk sentiment.

The Japanese currency weakened on Tuesday after a report said that Prime Minister Sanae Takaichi had expressed reservations to the Bank of Japan about moving forward with additional interest rate hikes. The yen was also affected by China’s decision to add more Japanese companies to its export restriction list, a move widely seen as a response to Takaichi’s comments regarding Taiwan.

Following Takaichi’s decisive victory in the February 8 election, the yen had previously strengthened on market expectations that a government leaning toward fiscal stimulus could shift the balance of risks toward tighter monetary policy.

The yen fell by 0.50% to 156.70 against the dollar after touching 156.82, its weakest level since February 9.

In a move that could reinforce a more dovish stance, the Japanese government on Wednesday nominated two academics viewed as strong supporters of stimulus policies to the central bank’s policy board, potentially steering the Bank of Japan toward a more accommodative path, although MUFG’s Head of Global Markets Research, Derek Halpenny, expressed some caution.

He said: “It cannot be concluded that this will significantly change the overall direction of the policy board, particularly since the departing members already belonged to the dovish camp.”

Nvidia Earnings in Focus

Investors are awaiting results from AI chipmaker Nvidia after Wednesday’s market close, as the stock carries nearly an 8% weight in the S&P 500, meaning its results could have a meaningful impact on market risk appetite.

Francesco Pesole, FX strategist at ING, said: “If the US dollar declines alongside higher-risk currencies, that would be a worrying signal that markets are developing broader concerns linked to a reassessment of the US AI sector.”

He added: “We see this scenario as less likely, and expect the dollar to continue respecting its — albeit weaker — negative correlation with US equities.”

The Australian dollar rose 0.35% to $0.7084 following faster inflation, which strengthened expectations for further interest rate hikes.

The Australian dollar is considered a highly risk-sensitive currency, closely tied to the performance of global risk assets, especially equities, and remains vulnerable to sharp swings if equity markets become volatile due to its stretched positioning.

Euro Driven by Dollar Moves

With the European Central Bank expected to keep its monetary policy unchanged throughout 2026, euro trading is likely to remain largely driven by movements in the US dollar.

Roberto Mialich, global FX strategist at UniCredit, said: “The recent US Supreme Court ruling on tariffs increases uncertainty and could push the Donald Trump administration to seek a weaker currency to support exports and reduce the widening trade deficit.”

Trump made only limited comments in Tuesday’s State of the Union address, failing to ease concerns over the direction of future trade and tariff policies.

The euro rose 0.05% to $1.1718, while the US Dollar Index edged down 0.05% to 97.92.

The Chinese yuan — which has gained around 7% over the past ten months — reached 6.8766 against the dollar on Tuesday, its highest level in nearly three years, and later stabilized at 6.8652 in offshore trading.

Analysts at Goldman Sachs said that the starting point of deeply undervalued currency levels, combined with strong export-sector performance, remains a significant supporting factor.

China also confirmed that it is closely monitoring US policies and will decide “at the appropriate time” whether to adjust its countermeasures to US tariffs.

Gold prices rose in European trading on Wednesday, resuming gains that were temporarily paused yesterday, and approached a four-week high, supported by the decline of the US dollar in the foreign exchange market.

With expectations for a Federal Reserve rate cut in March continuing to fade, markets are awaiting further evidence regarding the direction of US monetary policy throughout this year.

Price Overview

Gold prices today: gold rose by 1.3% to $5,210.74, up from the session opening level of $5,142.85, while recording a low of $5,121.57.

At Tuesday’s settlement, gold prices fell by around 1.65%, marking the first loss in five sessions, as a result of corrective moves and profit-taking after earlier reaching a four-week high of $5,249.88 per ounce.

US Dollar

The US Dollar Index declined by more than 0.2% on Wednesday, resuming losses that had paused over the previous two sessions, reflecting renewed weakness in the US currency against a basket of major and secondary currencies.

As is widely known, a weaker US dollar makes dollar-denominated gold bullion more attractive to buyers holding other currencies.

President Donald Trump’s State of the Union address to Congress added to market uncertainty, as it failed to provide sufficient reassurance about the stability of trade policy following the Supreme Court ruling that voided previous tariffs, prompting investors to sell dollar-denominated assets.

US Interest Rates

Federal Reserve Governor Christopher Waller said he is open to keeping interest rates unchanged at the March meeting if February labor market data shows that employment conditions have stabilized after the weak performance seen in 2025.

According to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the March meeting remains steady at 95%, while the probability of a 25 basis point rate cut stands at 5%.

To reassess these expectations, investors are closely watching upcoming US economic data releases, in addition to remarks from Federal Reserve officials.

Gold Outlook

Jim Wyckoff, senior analyst at Kitco Metals, said gold prices are moving higher again after a temporary correction, adding that the weaker US dollar is also supporting the rise in prices.

SPDR Gold Trust

Gold holdings in the SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — increased by 7.72 metric tons on Tuesday, marking the second consecutive daily rise. Total holdings climbed to 1,094.19 metric tons, the highest level since April 29, 2022.

The euro rose in European trading on Wednesday against a basket of global currencies, moving higher versus the US dollar as renewed pressure weighed on US assets, particularly the dollar, following President Donald Trump’s State of the Union address to Congress, which added to market uncertainty.

As inflationary pressures ease on policymakers at the European Central Bank, hopes have re-emerged for at least one European interest rate cut this year, while investors await further evidence regarding the timing of such a move.

Price Overview

Euro exchange rate today: the euro rose against the dollar by around 0.3% to $1.1805, up from the opening level of $1.1772, while recording a session low of $1.1771.

The euro ended Tuesday’s trading down by 0.1% against the dollar, resuming losses after a two-day pause during a recovery from the four-week low at $1.1742.

US dollar

The dollar index fell by more than 0.2% on Wednesday, resuming losses after a two-session pause, reflecting weaker performance of the US currency against a basket of major and secondary currencies.

President Donald Trump’s State of the Union speech in Congress increased market uncertainty, as it did not provide sufficient reassurance about trade policy stability following the Supreme Court ruling that invalidated previous tariffs, prompting investors to sell dollar-denominated assets.

Trade tensions

The European Parliament decided to postpone voting on the trade agreement with the United States in response to what it described as the “tariff chaos” created by President Donald Trump’s recent decisions.

Some European lawmakers argue that the current agreement favors the United States, as it grants American products zero-tariff access to European markets, while Europe would face tariffs of up to 15%, increasing pressure to suspend ratification.

European interest rates

Recent data released in Europe showed easing inflationary pressures on policymakers at the European Central Bank.

Following this data, money markets raised pricing for a 25 basis point European interest rate cut in March from 10% to 25%.

Traders also adjusted expectations from holding interest rates steady throughout the year to anticipating at least one 25 basis point cut.

Investors are now waiting for further economic data from the euro area on inflation, unemployment, and wages to reassess these expectations.

The Australian dollar rose in Asian trading on Wednesday against a basket of global currencies, moving into positive territory for a second consecutive day against its US counterpart and approaching its highest level in several weeks, following the release of stronger-than-expected inflation data in Australia.

The data indicates that persistent inflationary pressures remain in place for policymakers at the Reserve Bank of Australia, reinforcing expectations of an Australian interest rate hike in March.

Price Overview

The Australian dollar exchange rate today: the Australian dollar rose against the US dollar by 0.7% to 0.7110, up from the opening level of 0.7061, while recording a session low of 0.7057.

The Australian dollar ended Tuesday’s trading up by around 0.1% against the US dollar, marking a third daily gain within the past three sessions, supported by the recovery in global equity markets.

Inflation in Australia

Data released on Wednesday by the Australian Bureau of Statistics showed that the headline consumer price index rose by 3.8% year-on-year in January, above market expectations of a 3.7% increase, matching the 3.8% reading recorded in December.

Australian inflation came in above expectations in January.

These figures indicate that inflation remains above the Reserve Bank of Australia’s medium-term target range of 2% to 3%, strengthening the case for continued normalization of monetary policy and further interest rate increases.

Reserve Bank of Australia Governor Michele Bullock said earlier that inflation remains too high and cannot be allowed to get out of control, adding that there are concerns about the persistence of elevated inflation levels.

Australian interest rates

Following the above data, market pricing for a 25 basis point interest rate hike by the Reserve Bank of Australia in March rose from 50% to 60%.

Pricing for a 25 basis point rate hike in May also increased from 80% to 95%.

Investors are now awaiting additional data on inflation, unemployment, and wage growth in Australia to reassess these expectations.