US Dollar Slips as Yen Strengthens and Brent Crude Hits 108
The US dollar index fell to 99.1 as energy costs rose and Japanese authorities pressured investors to favor the yen.
The US dollar index declined from 99.96 to 99.1 over the past month. Brent crude oil prices rose from 88 USD to 108 USD during the same period. Market participants remain focused on global energy costs and economic stability. The dollar weakened after a period of stability in late July and early August.
The yen cross-rate showed the most significant movement in the dollar index components. The US and Japan intervened jointly in August, but the initial impact was limited. Japanese authorities later requested domestic institutional investors to adjust portfolios to favor the yen. This pressure, combined with stronger policy expectations for the Bank of Japan, proved effective.
Yen gains momentum against the dollar
USD/JPY fell from 164 to 155 in August before reversing back to 160. In September, the pair broke below 155 and tested 154. Markets have priced in a series of rate hikes through mid-2027. If authorities successfully reset capital flows, the move to 154 can be sustained.
Analysts forecast a slow descent to 146 by the end of 2028. This level remains 32% above the long-term pre-pandemic average of 1990 to 2019. There is significant scope for further yen appreciation. The timing depends on the actions of Japanese authorities and investor sentiment toward Japanese assets.
Euro and sterling face gradual appreciation
The euro and sterling have edged higher over the past month. Economic data for the Euro Area and UK has generally been positive. US economic growth continues to outperform, but rate expectations for all three regions may overstate necessary tightening. A period of relative currency stability is likely into year-end.
The euro is expected to rise from 1.16 USD to 1.17 USD by year-end. It is forecast to reach 1.21 USD in 2027 and 1.22 USD in the first half of 2028. Sterling is expected to hold at 1.35 USD until December. It should appreciate to 1.39 USD through 2027 and 1.41 USD by mid-2028.
Asian currencies track global growth trends
Asian currencies are expected to strengthen as developed-world inflation risks abate. The Singapore dollar has appreciated near its five-year high at 1.2680 SGD. It is forecast to trade at 1.25 SGD in late 2028. This compares to the 2012 low of 1.22 SGD.
The Chinese renminbi appreciated from 6.99 CNY to 6.71 CNY in 2026. Analysts expect further gains, with the pair forecast to fall to 6.30 CNY in late 2026. The dollar index is currently above its 10-year average of 98.7. The 20-year average stands at 90.8, which is 8% below the current spot rate.
