Dollar, Which Had Begun This Week with Monday Losses, Finishes Up on a Rising Note – Currency Thoughts
Dollar, Which Had Begun This Week with Monday Losses, Finishes Up on a Rising Note
September 19, 2025
In the short term at least, the dollar survived a cut of the federal funds rate target and further efforts by the Trump administration to influence monetary policy. Compared to Thursday closing levels, the dollar has strengthened 0.6% versus the Korean won, 0.5% against the Swiss franc and sterling, 0.4% relative to the euro and kiwi, 0.3% against the Australian dollar and 0.2% relative to the Canadian dollar, where the central bank rate was also cut. A dip of only 0.1% in the yen’s dollar value came on a day when the Bank of Japan again left its interest rate unchanged at a mere 0.5% but signaled that the interest rate could be raised as soon as the next scheduled policy review.
About an hour before today’s opening bell on Wall Street, U.S. stock futures had barely deviated from Thursday’s closing levels, and European share prices were narrowly mixed. In the Pacific Rim, however, stock markets closed down 0.9% in Taiwan, 0.6% in Japan, 0.5% in South Korea and India, and 0.3% in China but up 0.8% in New Zealand and 0.5% in Indonesia.
Ten-year sovereign debt yields have risen four basis points in Japan and two basis points in France, Italy and the United States (but 11 bps since Tuesday). The 10-year German bund yield is only a basis point firmer.
The prices of Bitcoin and WTI oil are 0.6% and 0.3% lower. Gold is little change.
The Bank of Japan’s nine-person Board split 7-2 on its as-expected vote not to change the 0.5% short-term interest rate. Members Takata and Tamura both wanted to raise the rate by 25 basis points to 0.75%. According to the released statement,
Takata Hajime considered that there had been a shift away from the deflationary norm and the price stability target had been more or less achieved. Tamura Naoki considered that, with risks to prices becoming more skewed to the upside, the Bank should set the policy interest rate a little closer to the neutral rate.
The next rate hike would be the fourth hike since an negative -0.1% rate from January 2016 until March 2024 was abandoned but only the first change since last January. The released statement today characterizes growth as moderately positive but projects a temporary slowdown of the pace just ahead due to a “slowdown in overseas economies and to a decline in domestic corporate profits.” Core CPI inflation (excluding fresh food) has been hovering above target at 2.5-3%. While monetary officials left their interest rate target at 0.5%, they did agree unanimously on the quantitative step of announcing plans to reduce over the next year ETF and J-REIT holdings by JPY 330 billion and JPY 5 billion. At Governor Ueda’s press conference, he reaffirmed the desire to see more data during this especially uncertain juncture in the global trade and geopolitical conditions before making a change in the interest rate.
The Bank of Japan’s decision came on the day that the economy’s August consumer price figures were released. These showed 0.4 percentage point reductions in both total and core inflation to 2.7% due to a much more negative energy price reading (-3.6% after -0.4% in July). Consumer price inflation when excluding energy as well as fresh food dipped only 0.1 percentage point to 3.3%.
German producer prices in August sank 0.5% on month, resulting in a the largest 12-month rate of decline, -2.2%. That slide contrasts with last February’s year-on-year reading of +0.7%.
Latvian PPI inflation climbed to a four-month high of 0.5% last month from -0.6% in July, and Georgian PPI inflation edged 0.2 percentage points higher to 3.8%. But in Slovenia, PPI inflation slowed to 0.9% from 1.1% in the previous month.
British retail sales growth of 0.5% on month in August were a tad stronger than street expectations but associated with only a 0.7% advance from a year earlier. Consumer confidence in the U.K. softened two index points to a 2-month low of -19 this month.
French business climate conditions slid 0.3 index points to a 2-month low in September, keeping the recent trend more or less stable. This was associated with an extension of the downtrend in the labor market to a 38-month low. Among business sectors, manufacturing slid to a 2-month low, but the readings in construction and services improved to 17- and 5-month highs.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan, French business climate, German PPI
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