The Japanese yen recouped some of its losses on Monday after retreating late last week, as markets assessed the timing of further interest rate hikes in Japan and the likelihood of official intervention, while thin year-end trading left European currencies largely stable.

A summary of opinions from Bank of Japan policymakers at their December meeting, published on Monday, showed that members discussed the need to continue raising interest rates. Japanese Finance Minister Satsuki Katayama said last week that Japan has full freedom to act against excessive moves in the yen.

Bart Wakabayashi, head of State Street’s Tokyo branch, said these intervention warnings have helped limit positioning in dollar/yen, although bearish sentiment toward the Japanese currency is evident in other foreign exchange pairs.

“I think holding long yen positions is extremely painful,” Wakabayashi said. “We’re seeing some expression of short yen positions against those currencies, especially against the Australian dollar.”

He added: “The market is still trying to understand the role the yen plays now in terms of being a safe haven.”

The dollar was last down 0.26% at 156.3 yen, after jumping 0.45% on Friday. The yen traded at 105.02 per Australian dollar, just shy of the 17-month low of 105.08 reached on Friday.

The dollar index, which measures the US currency against a basket of peers, edged slightly lower to 97.95. The euro ticked up marginally to $1.1780, while sterling was steady at $1.3503.

The Bank of Japan raised its benchmark interest rate to a 30-year high of 0.75% from 0.5% at its December meeting. The summary of opinions released on Monday showed that many board members saw the need for further rate hikes, with real interest rates still deeply negative once inflation is taken into account.

However, the rate hike failed to stem the yen’s decline, with the currency falling to 157.78 per dollar on December 19, prompting renewed intervention warnings. Japan last intervened to support the yen in July 2024, when it bought the currency after it slid to a 38-year low of 161.96 per dollar.

With limited data this week and thin trading ahead of New Year holidays in many markets, geopolitical developments moved to the forefront.

US President Donald Trump said on Sunday that he and Ukrainian President Volodymyr Zelenskyy were “very close, perhaps extremely close” to reaching an agreement to end the war in Ukraine, although both leaders acknowledged that some of the most complex issues remain unresolved.

In Asia, tensions remained elevated as China deployed military units around Taiwan ahead of live-fire drills scheduled for Tuesday. Meanwhile, North Korean state media reported that leader Kim Jong Un oversaw the launch of long-range missiles on Sunday, while South Korea’s Yonhap news agency said further tests could take place around New Year’s Day.

The main data focus this week will be the release of minutes from the Federal Open Market Committee meeting on Tuesday, from a gathering held earlier this month. The US Federal Reserve cut interest rates at that meeting and projected just one additional cut next year, while market participants have priced in at least two more.

Goldman Sachs analysts said in a note: “The FOMC adjusted its post-meeting statement to signal a higher bar for further rate cuts, and Federal Reserve Chair Jerome Powell reinforced this message during his press conference. We expect the December minutes to point to continued disagreement among committee members over the appropriate near-term path of monetary policy.”

The Australian dollar was little changed at $0.6717, while the Swiss franc was firmer at 0.787 per dollar.

Silver prices fell by more than 6% in the European market on Monday, driven by accelerating correction and profit-taking activity, after earlier hitting a fresh all-time high during Asian trading by breaking above the $80 per ounce level for the first time ever.

In addition to profit-taking pressure, silver prices came under further strain from the recovery of the US dollar in foreign exchange markets, as well as a slowdown in safe-haven buying amid positive developments surrounding peace talks between Russia and Ukraine.

Price Overview

• Silver prices today: Silver fell by 6.4% to $74.28, from an opening level of $79.33, after recording an intraday high of $83.97, its highest level on record.

• At Friday’s settlement, silver prices jumped by 10.5%, marking a fifth consecutive daily gain and the largest single-day increase since September 17, 2008, supported by record demand for the white metal.

• Silver gained more than 18% last week, posting a fifth straight weekly gain and the largest weekly increase on record.

• These sharp gains were driven by silver’s designation as a critical US mineral, limited global supply, and declining inventories amid rising industrial and investment demand.

US Dollar

The US dollar index rose by 0.1% on Monday, extending its gains for a third consecutive session and continuing its recovery from two-and-a-half-month lows, reflecting a broader rebound in the US currency against a basket of major and secondary currencies.

In addition to buying from lower levels, the dollar’s recovery ahead of year-end trading has been supported by short-covering activity, as the US currency approaches its largest annual loss since 2017.

Positive Developments

Following the recent meeting between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy, expectations have increased for tangible progress toward ending the war in Ukraine.

Trump said after the meeting in Florida that both the Russian and Ukrainian sides “want to reach an agreement,” adding that talks have entered a sensitive and advanced phase.

US Interest Rates

• According to the CME FedWatch Tool, pricing for the probability of keeping US interest rates unchanged at the January 2026 meeting currently stands at 82%, while the probability of a 25 basis point rate cut is priced at 18%.

• Investors are currently pricing in two US interest rate cuts over the course of next year, while Federal Reserve projections point to a single 25 basis point cut.

• To reprice these expectations, investors are closely monitoring upcoming US economic data, as well as comments from Federal Reserve officials.

• Minutes from the Federal Reserve’s latest monetary policy meeting are due to be released tomorrow, Tuesday, and are expected to provide clearer signals on the path of US interest rates in 2026.

Silver Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said that interest rate cuts, combined with continued strong industrial demand and constrained supply, could set the stage for silver to rally toward $100 per ounce in 2026.

Gold prices fell by nearly 2% in the European market on Monday at the start of the final trading week of 2025, retreating from their all-time highs amid accelerating correction and profit-taking activity, in addition to pressure from the continued recovery of the US dollar in foreign exchange markets.

The decline was also driven by reduced safe-haven demand following positive developments in peace talks between Russia and Ukraine, after US President Donald Trump said that both Vladimir Putin and Volodymyr Zelenskyy are showing genuine willingness to reach an agreement to end the war, noting that negotiations have entered their final stages.

Price Overview

• Gold prices today: Gold fell by about 2.0% to $4,445.16, from an opening level of $4,533.42, after recording an intraday high of $4,549.77.

• At Friday’s settlement, gold prices rose by 1.2%, marking a fresh all-time high at $4,550.04 per ounce.

• Gold prices gained 4.5% last week, posting a third consecutive weekly increase and the largest weekly gain since last October, supported by hopes that the Federal Reserve will continue cutting interest rates in 2026.

US Dollar

The US dollar index rose by 0.1% on Monday, extending its gains for a third consecutive session and continuing its recovery from two-and-a-half-month lows, reflecting a broader rebound in the US currency against a basket of major and secondary currencies.

In addition to buying from lower levels, the dollar’s recovery ahead of year-end trading has been supported by short-covering activity, as the US currency approaches its largest annual loss since 2017.

Positive Developments

Following the recent meeting between US President Donald Trump and Ukrainian President Volodymyr Zelenskyy, expectations have risen for tangible progress toward ending the war in Ukraine.

Trump said after the meeting in Florida that both the Russian and Ukrainian sides “want to reach an agreement,” adding that talks have entered a sensitive and advanced phase.

He acknowledged that some outstanding issues still require careful handling, but expressed optimism about the possibility of reaching a settlement in the coming period, boosting market hopes for a geopolitical breakthrough that could support global stability.

US Interest Rates

• According to the CME FedWatch Tool, pricing for the probability of keeping US interest rates unchanged at the January 2026 meeting currently stands at 82%, while the probability of a 25 basis point rate cut is priced at 18%.

• Investors are currently pricing in two US interest rate cuts over the course of next year, while Federal Reserve projections point to a single 25 basis point cut.

• To reprice these expectations, investors are closely monitoring upcoming US economic data, in addition to comments from Federal Reserve officials.

Gold Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said that the $5,000 level appears to be an achievable target for gold next year, provided the next Federal Reserve chair adopts a more dovish approach to monetary policy.

Waterer added that interest rate cuts, along with continued strong industrial demand and supply constraints, could set the stage for silver to rally toward $100 per ounce in 2026.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by about 2.86 metric tons on Friday, bringing total holdings to 1,071.13 metric tons, the highest level since June 22, 2022.

The euro retreated in European trading on Monday against a basket of global currencies, extending its losses against the US dollar for a third consecutive session and pulling back from a three-month high. The decline comes amid ongoing correction and profit-taking, alongside a recovery in the US currency ahead of the close of trading for 2025.

The downside in the single currency is being limited by fading expectations that the European Central Bank will cut interest rates in February 2026, particularly as economic activity in the euro area has improved recently, with forecasts pointing to a continuation of this improvement as downside risks recede.

Price overview

Euro exchange rate today: the euro fell 0.15% against the dollar to 1.1754, from an opening level of 1.1771, after recording a session high of 1.1786.

The euro ended Friday’s session down around 0.1% against the dollar, marking its second consecutive daily loss, as correction and profit-taking continued from the three-month high of $1.1808.

Last week, the euro gained 0.55% against the dollar, its fourth weekly advance in the past five weeks, supported by a narrowing interest rate differential between Europe and the United States.

The US dollar

The dollar index rose 0.1% on Monday, extending its gains for a third straight session and continuing its recovery from two-and-a-half-month lows. This reflects a broader rebound in the US currency against a basket of major and secondary currencies.

Beyond buying from lower levels, the dollar’s recovery ahead of year-end has also been supported by position adjustments and the unwinding of short positions, as the US currency moves toward posting its largest annual loss since 2017.

European interest rates

Money markets currently price the probability of a 25-basis-point interest rate cut by the European Central Bank in February 2026 at less than 10%.

To reassess these expectations, investors are closely monitoring upcoming euro area data on inflation, unemployment, and wage growth.

Interest rate differential

Following the Federal Reserve’s latest decision, the interest rate gap between Europe and the United States has narrowed to 160 basis points in favor of US rates, the smallest differential since May 2022, which supports the euro’s exchange rate against the US dollar.