Dollar Falls to 4-Year Low, Yen and Shutdown Risks Lead
The US dollar struggled to recover and fell to its weakest level in nearly four years on Tuesday (January 27th), dragged down by a strengthening yen and concerns about a US government shutdown ahead of the January 30th funding deadline. This pressure also pushed the euro and pound to their strongest levels since 2021, indicating that markets are becoming more willing to reduce their exposure to dollar assets.
In the FX market, the yen was the biggest focus. Rumors of a rate check and speculation about US-Japan coordination discouraged market participants from pushing USD/JPY higher. Japanese Finance Minister Satsuki Katayama also emphasized that Tokyo is ready to respond to foreign exchange fluctuations, in close coordination with US authorities.
Bloomberg Dollar Spot Index: Down -0.8%, breaking below 1180 (weakest since March 2022)
USD/JPY: Down about -1% to 152.57 (lowest since Oct. 30)
EUR/USD: Up +0.9% to 1.1990 (strongest since 2021)
GBP/USD: Up +0.8% to 1.3791 (strongest since 2021)
USD/CHF: Down -1.4% to 0.7658 (CHF was the strongest among the G-10)
USD/CAD: Down -0.9% to 1.3591 ahead of the BoC meeting
Data-wise, US consumer sentiment weighed on the dollar. The Conference Board's Consumer Confidence Index fell to 84.5, its lowest since May 2014, below market expectations—a signal that concerns about the cost of living and the job market are increasingly felt at the household level. The market is now holding its breath ahead of Wednesday's Fed decision and Powell's press conference. It's not just about interest rates, but also about confidence: short-term option premiums for "weaker dollar" positions have even widened to their highest levels since Bloomberg began tracking them in 2011—a sign that the market is seriously hedging against further USD weakness.
Source: Newsmaker.id
