The dollar slipped across Asian markets on Monday (Jan 26) as speculation grew that US officials could join Japanese authorities in efforts to stabilise the yen following its recent sharp sell-off, while regional equity markets opened the week on a cautious footing.
Reports that the Federal Reserve Bank of New York had contacted market participants to discuss movements in the yen sparked a rally in the Japanese currency, according to Bloomberg. The yen strengthened by more than 1 per cent to 153.89 per dollar, its strongest level since November, reversing part of a prolonged decline that had unsettled policymakers in Tokyo.
The yen’s weakness in recent weeks has been driven by concerns over Japan’s fiscal position, the Bank of Japan’s reluctance to pursue further interest rate hikes, and expectations that the US Federal Reserve will keep borrowing costs unchanged at its policy meeting this week. Japanese authorities last intervened directly in currency markets in 2024, when the yen fell to 160 against the dollar.
Renewed talk of intervention weighed on the greenback more broadly. The euro and the British pound rose, while the Singapore dollar gained 0.3 per cent to reach an 11-year high. Other Asian currencies also advanced, with the South Korean won climbing 1.3 per cent and the Malaysian ringgit touching its strongest level since June 2018.
The weaker dollar helped propel precious metals sharply higher. Gold surged almost 2 per cent to break above US$5,000 an ounce for the first time, reaching a peak of US$5,088.52. Silver, which crossed US$100 late last week, extended gains to trade above US$108.
Speculation around coordinated currency action was reinforced by comments from Japan’s top currency diplomat, Atsushi Mimura, who said Tokyo would “continue responding appropriately against FX moves, working closely with US authorities as needed,” citing a joint statement issued by Japanese and US finance ministers last September.
His remarks followed a warning from Prime Minister Sanae Takaichi on Sunday that Japan would take “all necessary measures” to counter what she described as speculative and highly abnormal currency movements.
Stephen Innes, managing partner at SPI Asset Management, said early Asian trading was marked by thin liquidity, amplifying the yen’s move. “Intervention-tinged language out of Tokyo reminded the market that yen weakness is no longer a free carry,” he said. “That was enough to knock the broader dollar lower into the Asia open.”
Lloyd Chan, currency strategist at MUFG, said markets were entering a period of heightened volatility. “The balance of risks may point toward dollar vulnerability and increased two-way moves in USD/JPY as investors weigh intervention uncertainty alongside evolving expectations around BoJ policy and Prime Minister Takaichi’s fiscal stance,” he said.
Precious metals have been setting repeated records as investors rush into safe-haven assets amid growing geopolitical tensions. These include renewed US pressure on Iran, comments by President Donald Trump regarding American naval deployments in the Gulf, and concerns over potential political disruptions in Washington, including the risk of another US government shutdown. Strong central bank gold buying and persistent inflation concerns have further supported prices.
“Gold’s recent price action has been textbook safe-haven behaviour,” said Fawad Razaqzada, market analyst at Forex.com. “Underlying demand for protection remains strong, and confidence in the dollar and bonds appears fragile.”
Attention now turns to the Federal Reserve’s policy meeting this week. Officials are widely expected to leave interest rates unchanged after three earlier cuts. Bank of America economists said the meeting was unlikely to deliver major policy signals, though Chair Jerome Powell may face questions about political pressure rather than monetary strategy.
Asian equity markets were mixed. Tokyo stocks slid nearly 2 per cent as a stronger yen weighed on exporters, while markets in Singapore, Seoul and Wellington also retreated. Gains were recorded in Hong Kong, Shanghai, Taipei and Manila.
Oil prices extended gains from Friday, when they jumped almost 3 per cent following Trump’s comments on heightened US military vigilance in the Middle East, keeping energy markets on edge.
