USD Surges as Yen Stumbles: Here's What's Moving Markets

The dollar index just hit a fresh 1.5-week high, up 0.39%, riding a wave of yen weakness and positive trade data. Here’s the breakdown:

Why the Dollar is Winning Right Now

Two major tailwinds are pushing the greenback higher:

1. Japan’s Stimulus Signals

Japanese officials just signaled a massive 20 trillion yen (~$129 billion) supplementary budget is coming to stimulate domestic demand. This spooked the BOJ-watcher crowd because it suggests delayed rate hikes—possibly not until March at earliest. The yen tanked to a 9.75-month low against the dollar on these dovish comments from a PM advisor. Translation: investors are fleeing the yen for the stronger dollar.

2. US Trade Data Beats

August’s trade deficit narrowed to -$59.6B from -$78.2B in July, beating forecasts of -$60.4B. This kind of improvement typically supports the dollar as it signals economic resilience.

What This Means for Other Assets

EUR/USD Down 0.23%: Euro weakness mirrors dollar strength. The currency pair hit a 1-week low, though ECB divergence (rates likely done cutting vs. the Fed cutting more through 2026) is providing some floor.

Precious Metals Catching Bids: Gold jumped 1.55% (+63.10) and silver surged 3.03% (+1.529), bouncing back from last week’s selloff. Safe-haven demand is real amid geopolitical uncertainty and tariff anxiety—but the stronger dollar is working against them. Central bank buying remains a bright spot: China’s gold reserves hit 74.09M ounces in October (12 straight months of accumulation), and global central banks bought 220 MT in Q3, up 28% quarter-over-quarter.

The Fed Rate-Cut Plot Twist

Market odds for a December 9-10 rate cut have cratered from 70% earlier this month to just 47% today. Mortgage applications are weakening too: MBA applications fell 5.2% week-over-week, with 30-year fixed rates rising 3 basis points to 6.37%. Translation: fewer rate cuts priced in = headwinds for gold and other rate-sensitive assets.

Bottom Line

The dollar’s winning streak is built on yen weakness + US economic data + fading Fed-cut expectations. Precious metals are stuck in a tug-of-war between safe-haven demand and a stronger dollar. Watch the Fed’s December meeting closely—it’s the next big catalyst.