The yen outperformed all G-10 currencies this week, holding close to the psychologically significant 150-per-dollar level as investors remain wary of potential intervention by Japanese authorities. Market participants are closely watching for signs of action as the yen’s weakening trajectory amplifies concerns around central bank measures to stabilize the currency.
In the U.S., inflationary pressures resurfaced with underlying September inflation figures exceeding expectations. Coupled with a robust labor market report showing declining unemployment and solid hiring activity, the data have led investors to scale back expectations of aggressive rate cuts by the Federal Reserve. Markets had previously priced in a 50 basis point cut at the Fed’s November meeting, but these stronger-than-expected metrics have tempered such projections, suggesting that policymakers may opt for a more measured approach moving forward.
Meanwhile, oil prices retreated for a third consecutive session as geopolitical tensions in the Middle East appeared to ease. Brent crude tumbled by as much as 4.1%, falling below $75 per barrel, while West Texas Intermediate dipped to around $71. Reports that Israel may refrain from targeting Iran’s oil infrastructure, following warnings from the U.S., alleviated concerns over a potential major supply disruption. Israeli Prime Minister Benjamin Netanyahu reportedly signaled to the Biden administration that any strikes on Iran would likely focus on military installations rather than energy or nuclear sites, further calming market fears.
These developments underscore the delicate balance in global markets, where currency interventions, inflation dynamics, and geopolitical risks are shaping investor sentiment and policy expectations.