USD/KRW

The Calm Before the Storm: Markets Hold Their Breath Ahead of the ECB Decision

Thursday began on the currency markets with quiet but unmistakable tension. The U.S. Dollar Index, a barometer of global confidence in the American currency, edged lower to 101.02. The decline was barely noticeable, but against the backdrop of recent events, it carried symbolic significance. The dollar was losing ground to the euro, which climbed to a one-week high ahead of the European Central Bank’s crucial monetary policy decision.

Investors around the world were holding their breath. Later today, the ECB is expected to announce its decision on interest rates. Although markets almost unanimously expect rates to remain unchanged, the real intrigue lies elsewhere: will policymakers maintain their hawkish rhetoric? Will they hint at another rate increase later this year? The answers could determine not only the euro’s future but also the direction of global capital flows.

As always, geopolitics is adding fuel to the fire. The Middle East remains engulfed in conflict. The U.S. military has carried out new strikes against Iran, while Yemen’s Houthis, loyal to their regional patron, have attacked oil tankers in the Red Sea. Brent crude remains firmly above $95 per barrel, creating a serious headache for central banks already struggling with inflation and now facing another surge in energy prices.

Despite its slight decline, the dollar remains a safe-haven currency. When the world becomes unstable, investors usually rush into the USDEUR ... U.S. dollar. Today, however, that classic mechanism appears to have malfunctioned. At least in the short term, the euro looks more attractive ahead of the ECB meeting.

European Central Bank: Hawks and Doves Enter a New Round

The ECB decision expected today is more than a technical procedure. It is a political and economic manifesto. President Christine Lagarde and her...

Tuesday: Dollar Reaches a One-Week High

Tuesday’s 21.07.2026 Asian currency trading was marked by caution. Most regional currencies remained confined to narrow trading ranges, unwilling to make a decisive move in either direction. Investors faced a difficult choice: on the one hand, the escalating conflict in the Middle East was pushing the dollar higher as a safe-haven currency; on the other, hopes for a diplomatic resolution prevented it from strengthening too sharply.

The U.S. Dollar Index rose to 100.99, its highest level since July 15. This appreciation was not driven by strong U.S. economic data or hawkish signals from the Federal Reserve. It was purely a geopolitical risk premium. In a world where military action is expanding with each passing day, the dollar remains one of the most reliable assets.

However, the dollar’s strength is putting pressure on Asian currencies. Energy-importing countries are particularly vulnerable: the rise in oil prices observed over the past several days is worsening their trade balances and creating additional inflationary pressure. For countries forced to purchase expensive oil on global markets, this represents a serious challenge. Their central banks now face a dilemma: raise interest rates to combat inflation and the risk of currency depreciation, or maintain accommodative policies to support economic growth.

Middle East Conflict: Ninth Consecutive Night of Strikes

The escalating conflict between the United States and Iran remains at the center of attention. U.S. Central Command confirmed the completion of a ninth consecutive night of airstrikes against Iranian targets. The strikes targeted command centers, missile and drone launch sites, and maritime infrastructure.

However, the most alarming development occurred on another front. The Iran-backed Houthi movement in Yemen announced a naval blockade of Saudi Arabia. This means that energy supplies passing through the Red Sea and the Bab el-Mandeb Strait could be disrupted....

Monday on the Currency Markets: The Calm Before the Storm

The first trading day of the week on Asian currency markets was marked by cautious anticipation. Most regional currencies remained within narrow trading ranges, as though listening closely to events unfolding thousands of kilometres away. Investors faced a difficult choice: on the one hand, the US dollar is receiving safe-haven support amid the escalating conflict in the Middle East; on the other hand, declining US Treasury yields and expectations that the Federal Reserve will keep its policy unchanged are putting pressure on the currency.

The US Dollar Index stabilised at 100.73 after briefly strengthening at the beginning of the session. However, this calm may be deceptive, as a busy week lies ahead, featuring central bank meetings and the release of key economic data across Asia. Markets are preparing for possible surprises.

The Dollar and the Middle East: A Game on Two Fronts

Geopolitics continues to be the primary driver of currency markets. The conflict between the United States and Iran has entered its ninth consecutive night of air strikes. Brent crude oil prices have risen sharply, automatically intensifying concerns about global inflation. Should energy supplies be disrupted, fuel prices could soar, affecting consumers and manufacturers worldwide.

For the US dollar, this situation is a double-edged sword. On the one hand, rising oil prices support the dollar because the United States is a major energy exporter, and higher oil prices improve the country’s trade balance. On the other hand, elevated oil prices could force the Federal Reserve to reconsider its monetary policy if inflation begins to accelerate.

For now, however, markets are pricing in the continuation of the Fed’s current policy at its meeting on 29 July. Federal funds futures indicate an 85.6% probability that interest rates will remain unchanged. This...

Friday Morning: Asia Holds Its Breath

Friday began across Asian currency markets with a sense of uneasy calm. Most regional currencies remained confined to narrow trading ranges, seemingly waiting for developments unfolding thousands of kilometres away. The Middle East once again became the main source of market-moving news, and its influence outweighed even the much-anticipated weakening of the US dollar.

The US Dollar Index, which fell to one-month lows this week following softer inflation data, edged up by 0.1% to 100.79 on Friday morning. The move may appear insignificant, but it was enough to encourage caution among Asian currencies. The dollar continues to benefit from its safe-haven status, and whenever geopolitical tensions intensify, investors begin turning back toward the US currency despite its fundamental weaknesses.

The situation in the Middle East is indeed becoming increasingly tense. The United States and Iran continue to exchange strikes, while yesterday’s reports of renewed military action confirmed that neither side appears ready to de-escalate the conflict. Oil prices remain close to one-month highs, automatically triggering a chain of rising inflation expectations. More expensive oil means higher energy costs, higher consumer prices and, ultimately, tighter monetary policy. For Asian economies, most of which are net energy importers, this represents a double blow.

The Yen: Near a 40-Year Low and Hoping for a Miracle

The Japanese yen remains the central currency drama of the year. The USDJPY ... pair is once again trading near 162.4, only a few tenths below the 40-year low of 162.84 reached earlier this month. The yen has not been this weak since the Japanese economy was operating under entirely different conditions.

The reasons behind the decline are well known and no longer surprise market participants. The enormous interest-rate gap between the United States and Japan continues to work against the yen. While...

Introduction: The Calm Before the Storm

Tuesday’s trading session in Asian currency markets was marked by a wait-and-see attitude. The Japanese yen held its ground, but traders remained on alert over the possibility of intervention by Tokyo. Policymakers’ comments regarding the allocation of state pension fund assets kept the market on edge, preventing the yen from either strengthening or weakening significantly.

The dollar also remained largely unchanged ahead of key US inflation data scheduled for release later on Tuesday. Investors are awaiting June Consumer Price Index figures and comments from Federal Reserve Governor Christopher Waller. These events are expected to determine the future path of US interest rates.

Meanwhile, tensions in the Middle East continue to escalate. President Trump stated that the United States would restore the naval blockade of Iran and ensure that the Strait of Hormuz remains open under the protection of the US armed forces. Oil prices surged, bringing inflation risks back into focus.

In this article, we will examine all the factors affecting the yen and other Asian currencies, assess the outlook for the dollar, and attempt to determine where the market may be heading in the coming days.

The Yen: Expectations of Intervention and the Repatriation of Pension Assets

The Finance Minister Clarifies Her Position

The yen remained in the spotlight after Finance Minister Satsuki Katayama elaborated on comments she had made the previous week. She said that the portfolio of the Government Pension Investment Fund could be reviewed if necessary, as Japan pursues policies aimed at increasing the attractiveness of yen-denominated assets.

These are not merely words. Japan’s Government Pension Investment Fund is the world’s largest pension fund, managing more than $1.5 trillion in assets. Any change in its investment strategy could have an enormous impact on currency markets.

Katayama also proposed allowing Japanese...

Wednesday in Asian currency markets began with an oppressive calm. Asian currencies did not move. The dollar did not move. The dollar index (DXY) remained frozen after four days of decline. Everyone stood still. Like rabbits before a predator. Or like traders ahead of the most important event of the week — the meeting of the U.S. Federal Reserve, the first under new Chairman Kevin Warsh.

USD/JPY — the Japanese yen — fell by 0.1% to 160.30. It was a symbolic move. Even after the Bank of Japan raised its rate to 1.0% the previous day — the highest in 31 years — the yen did not strengthen. Because everyone is waiting for the Fed.

USD/CNY — the Chinese yuan — was unchanged. USD/SGD — the Singapore dollar — was unchanged. USD/INR — the Indian rupee — fell by 0.3%, but this was a local move. AUD/USD — the Australian dollar — was unchanged after the RBA kept rates steady.

Only USD/KRW — the South Korean won — rose by 0.4%, breaking away from the general trend. But even this was likely linked to a tech rally in Samsung and SK Hynix shares rather than currency policy.

The reason for the calm is anticipation. Traders do not want to open new positions ahead of the Fed meeting. Uncertainty is too high. The risks are too large.

There is also the peace agreement between the U.S. and Iran. Details are becoming clearer. On Tuesday, the first concrete terms emerged. The agreement provides for the immediate resumption of Iranian oil exports. Iran agrees not to develop nuclear weapons and freezes its nuclear program for 60 days for negotiations.

This is positive for markets. But traders want to see a signed document, not just words. So they wait.

So what is happening in...

Tuesday: A Day of Historic Decisions and No Market Reaction

Tuesday began with an event that, under normal circumstances, would have shaken currency markets to their core. The Bank of Japan raised its short-term policy rate by 25 basis points to 1.0% — the highest level in 31 years. The last time Japanese interest rates stood at this level was in 1995, when the internet was still in its infancy and many of today's traders had not even been born.

The decision passed by a 7–1 vote. Governor Kazuo Ueda did not attend the meeting as he is currently undergoing medical treatment in the hospital. The meeting was chaired by Deputy Governor Shinichi Uchida instead. It is an unusual situation: the head of the central bank was absent during a historic policy decision.

And what happened?

Virtually nothing.

USD/JPY barely moved. The yen remained around ¥160.23 per dollar, only slightly different from levels seen before the announcement. Traders who expected a rate hike to strengthen the yen were left disappointed.

Why?

Because markets had already priced in the move over recent weeks. The real surprise would have been if the Bank of Japan had not raised rates. Since the hike was widely expected, the market reaction was essentially zero.

The yen continues to trade near the psychologically important ¥160-per-dollar level. Back in April, when the dollar first broke above ¥160, Japanese authorities intervened in the currency market. This time, they have remained on the sidelines, apparently viewing ¥160 as an acceptable exchange rate with policy rates at 1.0%.

But let's take a closer look at what is actually happening across Asian currency markets on Tuesday, why most currencies appear frozen in place, and what traders are waiting for from other central banks.

Bank of Japan: A Historic Move Without the...

Tuesday Morning: The Dollar Retreats, Asia Recovers

On Tuesday morning, currency traders around the world finally allowed themselves a brief moment of relief. Not celebration, not relaxation—just a chance to exhale after weeks of relentless tension. Asian currencies, which had been under heavy pressure from a strengthening U.S. dollar for the past two weeks, suddenly moved higher across the board.

The gains were modest—half a percent here, a quarter percent there—but the fact that they were rising at all while the dollar retreated from a two-month high was notable.

The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, slipped 0.1% to just below the 100 mark, trading at 99.96. A day earlier, it had reached 100.21. The difference may seem insignificant—just 0.25%—but in the foreign exchange market, where billions of dollars move between currencies in fractions of a second, such a shift is meaningful.

So what changed? Why did the dollar, which had looked so strong on Friday and Monday, suddenly lose momentum?

The answer lies in the Middle East.

After exchanging missile strikes over the weekend, Israel and Iran ultimately stepped back from the brink. A ceasefire brokered with significant involvement from U.S. President Donald Trump appears to be holding, at least for now. The agreement is fragile and far from perfect, but it has reduced the immediate risk of a full-scale regional war.

That matters because it lowers the probability of oil prices surging toward $150 per barrel and reduces fears of a major disruption to global trade. Investors who had rushed into the U.S. dollar as a safe haven felt comfortable taking a step back.

South Korean Won and Indian Rupee Lead the Gains

Among Asian currencies, two stood out: the South Korean won and the Indian rupee.

The South...

Monday Calm After Friday’s Storm

Monday opened with a sense of relief across Asian currency markets. Not because everything suddenly improved, but because conditions had stopped getting worse. After Friday’s sharp sell-off, when stronger-than-expected U.S. employment data hit regional currencies like a sledgehammer, markets entered a pause. Investors are digesting the information, reassessing risks, and recalculating their positions.

The U.S. Dollar Index remained near a two-month high but failed to move significantly higher. Dollar futures were also largely unchanged. Asian currencies stabilized, with some even posting modest gains.

Sentiment, however, remains cautious. Geopolitical tensions have once again come to the forefront after Iran and Israel exchanged strikes on Sunday evening. The Strait of Hormuz remains under threat. Oil prices are elevated, inflation risks are rising, and the U.S. dollar—typically comfortable in such an environment—continues to pressure virtually every other asset class.

The U.S. employment report released on Friday was the defining event of the week. The economy added 172,000 jobs in May, significantly exceeding expectations. Many analysts had anticipated a slowdown to around 150,000–160,000 jobs. Instead, payroll growth came in at 172,000. While not a record-breaking figure, it was strong enough to reinforce the view that the Federal Reserve is unlikely to rush into cutting interest rates.

Moreover, markets are increasingly pricing in not only a prolonged period of stable rates but also the possibility of another rate hike later this year. Traders see a non-zero probability of such a move by December. For Asian currencies, that is a troubling prospect. Higher Fed rates support a stronger dollar, and a stronger dollar generally means weakness everywhere else.

Yen Back at a Critical Threshold

The Japanese yen once again found itself at the center of attention. The USD/JPY exchange rate hovered around 160.31, its highest level since late April.

Back in...

Thursday’s Asian trading session opened with news that, while increasingly familiar in recent weeks, remains deeply unsettling. U.S. armed forces launched another round of strikes on targets in southern Iran — the second such operation in a week. Markets reacted instantly and predictably: a rush into the dollar. The U.S. dollar index edged higher, Asian currencies fell into negative territory, and oil prices surged. All of this is unfolding on the very day the Federal Reserve is set to release its preferred inflation gauge — the PCE index. Thursday is shaping up to be a volatile one.

Second Strike in a Week: Why Bombs Move Currencies

Whenever the U.S. strikes Iranian targets, currency markets tend to follow the same script. The dollar rises, while nearly every other currency weakens. This has little to do with patriotism or confidence in American military power. It is simply cold financial logic.

Conflict involving Iran threatens oil supplies. Disruptions in oil supplies drive energy prices higher. Rising energy costs fuel inflation. Higher inflation, in turn, forces the Federal Reserve to keep interest rates elevated — or even raise them further. And high interest rates make the dollar more attractive to investors searching for yield.

But on Thursday, another element was added to this familiar chain reaction. President Trump personally rejected recent reports suggesting Iran was prepared to reopen the Strait of Hormuz within thirty days. That statement dealt a blow to the fragile optimism that had supported markets over the past few days. Investors who only yesterday hoped for a near-term peace agreement are now being forced to admit that the conflict may drag on. And a prolonged conflict means prolonged inflation. Prolonged inflation means rates staying higher for longer.

Markets have largely abandoned hopes for a quick resolution, and safe-haven capital is pouring...