Dollar Falls on Yen Intervention Risk, Gold Rises: Markets Wrap

(Bloomberg) — The dollar dropped against most of its major peers as potential US involvement in foreign-exchange intervention in Japan hurt sentiment toward the world’s reserve currency. Gold rose above $5,000 for the first time on haven demand and US stock futures fell.

The Bloomberg Dollar Spot Index slid to the lowest level since September after a rate check Friday by the Federal Reserve Bank of New York spurred speculation the US may assist Japan in efforts to weaken the greenback versus the yen. The Japanese currency surged as much as 1.2% versus the dollar.

Asian currencies benefited from the weak dollar with the Malaysian ringgit rising to the strongest level since 2018, and the South Korean won climbing to its highest level in about three weeks. Singapore’s currency advanced to its strongest level since 2014.

The volatility in foreign-exchange markets comes as Japan’s top currency chief Atsushi Mimura said authorities in Tokyo will respond in close coordination with their counterparts in Washington. Earlier, Japan’s Prime Minister Sanae Takaichi warned markets that the government is ready to take action.

“The bigger signal is policy coordination,” said Daniel Baeza, senior vice president at Frontclear. “If markets interpret coordination as a willingness to tolerate easier global dollar conditions, especially alongside a dovish Fed reaction function, that could reinforce short-term dollar downside.”

Traders interpreted the New York Fed’s actions as an indication the central bank was preparing to assist Japanese officials in intervening directly in the currency market to prop up the yen. The dollar fell the most since May last week amid unpredictable US policymaking, tariff tensions between the US and Europe, and attacks on the Federal Reserve’s independence.

Over the weekend, concerns also rose about another US government shutdown, while President Donald Trump threatened 100% tariffs on imports from Canada.

Attention is turning to the dollar and Japan once again after a surge in the Asian country’s bond yields last week unsettled global fixed-income markets. The coming days are pivotal for investors as the Fed prepares to deliver its policy decision and megacaps including Microsoft Corp. and Tesla Inc. report earnings.

For many dollar watchers, signs of US support to boost the yen reopen the debate about potential coordinated foreign-exchange intervention to guide the greenback lower against the currencies of its key trading partners.

The thinking goes that such a pact would help American exporters compete with rivals such as China and Japan.

“If the New York Fed chooses to join in, then that would amplify the yen rally,” said Gareth Berry, a strategist at Macquarie Bank Ltd. in Singapore. “And not just for symbolic reasons. Japan has lots of USD to sell, but the NY Fed has an infinite amount. It would also be interpreted as a sign that Trump wants a weaker dollar more generally.”

What Bloomberg strategists say…

The growing risk of another partial government shutdown will reinforce the self-feeding dynamic to increase diversification away from the greenback and US assets. The US dollar’s selloff will accelerate as foreign investors increase their currency-hedging ratios and now that the yen depreciation trend has been stalled via action from officials.

— Mark Cudmore, MLIV Executive Editor. For full analysis, click here.

Over the weekend, concerns about another US government shutdown increased as Senate Democratic leader Chuck Schumer vowed to block a massive spending package unless Republicans strip funding for the Department of Homeland Security. That raised the risk of a partial US government shutdown.

Traders are also paying attention to geopolitical tensions after Trump dispatched naval assets to the Middle East, prompting fresh speculation that he’ll follow through on threats to attack Iran’s senior leadership amid a violent crackdown on nationwide protests.

Brent crude edged higher, building on gains from Friday, to trade above $66 a barrel.

The main event this week will be the outcome of the Fed’s Jan. 27-28 policy meeting. The central bank is widely expected to keep rates unchanged even as Trump calls for lower borrowing costs.

Bond investors will also turn their focus to leadership change at the central bank after Trump said last week he will soon reveal a successor to Chair Jerome Powell.

Meanwhile, gold advanced beyond $5,000 an ounce for the first time, extending a breakneck rally fueled by Trump’s reshaping of international relations and investor flight from sovereign bonds and currencies.

Silver jumped more than 6% to a record high, having crossed $100 an ounce in the previous session in a rally supported by strong demand from retail buyers from Shanghai to Istanbul.

“We expect this year’s investment focus to be increasingly skewed toward commodities,” said Gerald Gan, chief investment officer at Singapore-based Reed Capital Partners. “This view is driven by heightened geopolitical tensions, continued debasement of the dollar, and the persistence of ample liquidity and lower interest rates from the Fed.”

Corporate Highlights:

Samsung Electronics Co. is getting close to securing certification from Nvidia Corp. for the latest version of its AI memory chip, called HBM4 Chinese energy-drink maker Eastroc Beverage Group Co. has started taking investor orders for its second listing in Hong Kong that may fetch as much as HK$10.1 billion ($1.3 billion). BYD Co. aims to increase deliveries to markets outside China by nearly 25% as the world’s largest electric-vehicle maker grapples with challenges at home. Some of the main moves in markets:

Stocks

S&P 500 futures fell 0.3% as of 12:55 p.m. Tokyo time Japan’s Topix fell 2% Hong Kong’s Hang Seng was little changed The Shanghai Composite rose 0.1% Euro Stoxx 50 futures fell 0.2% Currencies

The Bloomberg Dollar Spot Index fell 0.3% The euro rose 0.3% to $1.1860 The Japanese yen rose 1% to 154.22 per dollar The offshore yuan was little changed at 6.9524 per dollar Cryptocurrencies

Bitcoin rose 0.6% to $86,985.79 Ether rose 0.8% to $2,837.92 Bonds

The yield on 10-year Treasuries was little changed at 4.22% Japan’s 10-year yield declined three basis points to 2.225% Australia’s 10-year yield advanced two basis points to 4.82% Commodities

West Texas Intermediate crude was little changed Spot gold rose 1.7% to $5,073.68 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu.

©2026 Bloomberg L.P.