The U.S. dollar edged higher on Wednesday, supported by firmer U.S. Treasury yields, while the yen and euro lagged in thin trading conditions. Analysts cited a technically oversold short-term market and rising U.S. rates as key tailwinds for the greenback, even as speculation of a Bank of Japan rate hike next month persisted.
The dollar’s gains came despite remarks from a Bank of Japan deputy governor that appeared to bolster expectations of a near-term policy adjustment. U.S. rate moves continued to exert a stronger influence on exchange rates than Japanese policy signals, according to the analysis.
The euro slipped to a five-day low near $1.1640 on Tuesday, roughly midway through its rally since the U.S. Treasury announced a doubling of its bond buyback program. The single currency failed to reclaim the $1.1660 mark on Wednesday and briefly dipped below its 200-day moving average at $1.1635, with the 61.8% Fibonacci retracement level near $1.1625 providing additional technical reference.
Against the yen, the dollar held below Tuesday’s high of about ¥159.50 but still settled at its highest level in six sessions, around ¥159.30. The greenback marginally extended gains on Wednesday, breaching yesterday’s high in European trading. The five-day moving average crossed above the 20-day moving average for the first time since the last BOJ intervention in July, reinforcing technical upside momentum despite lingering skepticism about Japan’s policy path.
The British pound fell roughly 0.4% on Tuesday, one of its largest declines in a month, to a five-day low just below $1.3585—nearly matching the 61.8% retracement of its post-Treasury buyback gains. Losses extended to nearly $1.3570 on Wednesday, with the next technical support area eyed at $1.3335–60. Options totaling GBP840 million expiring at $1.3550 added to near-term positioning risks.
The Canadian dollar remained under pressure amid escalating U.S.-Canada trade tensions, though it held its ground relative to other G10 currencies with a 0.25% decline. The U.S. dollar approached CAD1.3895, remaining below that level on Wednesday, while resistance was noted near last week’s highs around CAD1.3910. Further upside targets included the 20-day moving average near CAD1.3920 and the CAD1.3950–60 area. U.S. Trade Representative Greer’s threat to ban certain Canadian imports added to the crosscurrents.
The Australian dollar reached nearly $0.7190 on Tuesday, its strongest level since early June, before paring gains to $0.7165. The currency remained supported by the five-day moving average and firmer-than-expected domestic data, including Tuesday’s consumer price report and household spending figures, which reinforced expectations of another Reserve Bank of Australia rate hike.
In emerging markets, the dollar traded on both sides of Tuesday’s range against the Mexican peso, settling within the range but with upside momentum persisting. The greenback edged above MXN16.99 on Wednesday, with a move above MXN17.00 exposing last week’s high near MXN17.08. The 20-day moving average sits closer to MXN17.10, while the 38.2% retracement of the late-July decline is near MXN17.1365.
The dollar recovered from a three-and-a-half-year low against the offshore yuan on Tuesday, settling near CNH6.7225 before consolidating around the same level on Wednesday. The People’s Bank of China raised its daily fix to CNY6.7840 from CNY6.7829, reflecting the firmer greenback backdrop.
Higher oil prices and a broadly stronger dollar weighed on the Indian rupee after a holiday closure, erasing earlier gains. The dollar reached nearly INR95.39 on Tuesday and rebounded to INR95.56 on Wednesday, remaining below last week’s high slightly above INR95.76.
U.S. benchmark 10-year Treasury yields rose 3–5 basis points across the curve on Tuesday, with the 10-year note approaching 6.67%. European yields were modestly higher by 1–2 basis points, while the two-year note gained roughly 2 basis points.
Gold prices pulled back 1.3% on Tuesday, erasing the prior two days of gains and slipping to a four-day low just below $4,579. The analysis suggested a corrective target near $4,555 if the recent leg up—linked to the U.S. Treasury’s buyback announcement—was to reverse. Silver faced resistance near $70 and recorded an inside day, remaining within Tuesday’s range of $67.45–$69.95.
October crude oil recovered from a dip below $80, its first such close since mid-August, and rose to session highs near $83.30 before holding above $80 on Wednesday. Last week’s peak was nearly $87.70.
U.S. data releases on Wednesday included the advanced goods trade deficit, retail and wholesale inventories, weekly jobless claims, and the Kansas City Fed’s August manufacturing survey. The trade gap improvement in the first half of 2026—estimated at about $534.8 billion compared with $716.6 billion in the first half of 2025—was noted as distorted by front-running of tariffs implemented last year. Weekly jobless claims, with a four-week moving average of 204,000 as of mid-August, remained a focal point for labor market resilience.
Canada’s June establishment employment survey and an estimate of the second-quarter current account balance were also due, with the latter expected to show a swing into surplus after two years of deficits amid recent economic contractions.
