Here’s what you need to know on Monday, January 12:
The US dollar began a correction from monthly highs against its major counterparts on Monday, under pressure from new threats to the independence of the US Federal Reserve, although bets on interest rate cuts this year eased.
US dollar price today
The table below shows the percentage change in the US Dollar (USD) against the major currencies listed today. The US dollar was the weakest against the Swiss franc.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.29% | -0.19% | 0.08% | -0.15% | -0.12% | -0.28% | -0.35% | |
| euro | 0.29% | 0.10% | 0.35% | 0.14% | 0.17% | 0.01% | -0.06% | |
| GBP | 0.19% | -0.10% | 0.25% | 0.04% | 0.07% | -0.09% | -0.17% | |
| JPY | -0.08% | -0.35% | -0.25% | -0.23% | -0.20% | -0.35% | -0.42% | |
| Canadian | 0.15% | -0.14% | -0.04% | 0.23% | 0.03% | -0.12% | -0.20% | |
| Australian dollar | 0.12% | -0.17% | -0.07% | 0.20% | -0.03% | -0.16% | -0.24% | |
| New Zealand dollar | 0.28% | -0.01% | 0.09% | 0.35% | 0.12% | 0.16% | -0.08% | |
| Swiss franc | 0.35% | 0.06% | 0.17% | 0.42% | 0.20% | 0.24% | 0.08% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select USD from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US federal prosecutors opened a criminal investigation into Bank Chairman Jerome Powell in connection with the central bank’s renovation of its headquarters in Washington and his testimony before Congress about the scope of the project, last June.
Powell denounced the US administration’s attacks, noting that “the new threat is not related to his testimony or the renewal project, but rather to the pretext.”
Fed concerns overshadowed lower bets on a Fed rate cut this quarter following Friday’s US employment report. Data on Friday showed that nonfarm payrolls increased by 50,000 jobs last month after a downwardly revised rise of 56,000 jobs in November and versus an expected gain of 60,000 jobs. The unemployment rate fell from a four-year high of 4.6% to 4.4% in December, compared to an estimated reading of 4.5%.
However, the dollar’s downside could be verified by a rush to safety amid escalating geopolitical tensions between the US and Iran, as well as between Russia and Ukraine.
Reports over the weekend indicated that US President Donald Trump is considering a series of potential military options in Iran, after days of civil unrest, and if the Iranian regime uses lethal force against civilians.
Meanwhile, the UN Security Council called an emergency meeting on Monday after Russia used its new Oreshnik hypersonic ballistic missile on Friday in a major strike on Ukraine.
AUD/USD maintains its recovery near the 0.6700 area, with further rise capped by risk aversion. Broad-based US dollar weakness and hawkish expectations surrounding the Reserve Bank of Australia’s (RBA) interest rate outlook are keeping buyers interested.
USD/JPY It regains 158.00 early in Europe, after seeing moderate volatility in the Asian session. The Japanese yen is losing strength due to renewed political tensions, as the risk-free market environment does little to ease the pressure.
“The worsening trade dispute between Japan and China and reports that Japanese Prime Minister Sanae Takaishi may call an early general election add a layer of uncertainty amid lack of clarity on the likely timing of the next interest rate hike from the Bank of Japan, undermining the local currency,” notes FXStreet analyst Harish Manghani.
EUR/USD is advancing towards the 1.1700 area, drawing support from renewed declines in the US dollar, while GBP/USD It also benefits from this and jumps back above 1.3400. Traders await January Sentix Eurozone Investor Confidence data in the European session for fresh trading momentum.
Gold is building on the bullish momentum seen last week, reaching new highs of US$4,601 in Asian trading before quickly retreating to around US$4,475, where it is now fluctuating. Silver tested the $84 mark amid renewed safe-haven demand.
WTI challenged monthly highs of $59.60 again, but failed to hold higher levels entering early European trading hours. Efforts to resume oil exports from Venezuela, coupled with fears of oversupply, have trumped escalating civil protests in Iran.
Frequently asked questions about risk sentiment
In the world of financial terminology, the two widely used terms “risk appetite” and “risk aversion” refer to the level of risk that investors are willing to take over the indicated period. In a “risk on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk off” market, investors begin to “play safe” because they are concerned about the future, and thus buy assets that are less risky and more guaranteed to generate a return, even if it is relatively modest.
Typically, during periods of “risk on”, stock markets rise, and most commodities – with the exception of gold – will also rise in value because they benefit from positive growth expectations. The currencies of countries exporting heavy goods are strengthening due to increased demand, and cryptocurrencies are rising. In a “risk off” market, bonds – especially major government bonds – rise, gold shines, and safe-haven currencies like the Japanese yen, Swiss franc and US dollar all benefit.
The Australian Dollar (AUD), Canadian Dollar (CAD), New Zealand Dollar (NZD) and minor foreign currencies such as the Ruble (RUB) and South African Rand (ZAR) tend to appreciate in ‘risk’ markets. This is because the economies of these currencies rely heavily on commodity exports for growth, and commodities tend to rise in price during periods of risk. This is because investors expect increased demand for raw materials in the future due to increased economic activity.
The major currencies that tend to rise during “risk off” periods are the US Dollar (USD), the Japanese Yen (JPY), and the Swiss Franc (CHF). The US dollar, because it is the world’s reserve currency, and because in times of crises investors buy US government debt, which is considered safe because the world’s largest economy is unlikely to default. The reason for the yen is the increased demand for Japanese government bonds, because a high percentage of them are held by domestic investors who are unlikely to get rid of them – even in a crisis. The Swiss franc, because strict Swiss banking laws provide investors with enhanced capital protection.
