Gold and silver prices have surged sharply, driven by safe-haven demand, lower real yields and US dollar weakness. Gold approached the US$4,500 level, while silver climbed close to US$70, both nearing key psychological resistance points.

The Japanese yen continued to strengthen, extending gains after verbal warnings from top officials Atsushi Mimura and Finance Minister Satsuki Katayama against speculative and one-sided forex moves. These interventions helped push USD/JPY down to around 156.30.

In Japan, equities rose as government bond yields retreated from recent record highs. The Topix index advanced to 3,422, nearing its recent peak of 3,434.6, supported by Goldman Sachs’ plans to expand acquisitions and investments in Japan’s corporate sector by approximately US$5.1bn over the next decade, focusing on mid-sized firms. However, the tech-heavy Nikkei lagged due to valuation concerns around AI-related stocks. Yields on two-, 20- and 30-year Japanese government bonds declined as conditions stabilised after earlier spikes.

In China, the People’s Bank of China (PBOC) set the USD/CNY central parity rate at 7.0523, marking about a 15-month high for the onshore yuan and showing the largest weak-side deviation versus Reuters’ estimate since November 2022. This suggests the PBOC is tolerating gradual yuan appreciation. Despite the firm fixing, spot trading saw the yuan strengthen past 7.03 to the dollar—the strongest level since October 2024—reflecting overall dollar weakness.

The Australian dollar moved slightly higher after the release of the December minutes from the Reserve Bank of Australia (RBA). The minutes highlighted ongoing debate about whether monetary policy remains restrictive amid limited spare capacity and inflation risks. The RBA left the door open to further tightening in 2026 should inflation pressures persist, maintaining a hawkish tone despite a data-dependent stance.

In the US, Treasury comments added to policy uncertainty. Scott Bessent noted a possible reconsideration of the Fed’s inflation target and hinted at an end to the dot plot, as growing support emerges among potential Fed chair candidates for changes in policy communication.

Geopolitical developments included former President Donald Trump emphasising the US need for Greenland for national security reasons, citing increased Russian and Chinese maritime activity near the territory.

For forex traders, these developments highlight the current environment of safe-haven flows benefiting precious metals and the Japanese yen, the potential for further yen strength amid official interventions, and cautious optimism for currencies like the Australian dollar as central banks debate tightening amid inflation concerns. The PBOC’s approach suggests continued tolerance of gradual yuan strength, while US policy uncertainties and geopolitical risks remain factors to monitor closely.

Original Source: Eamonn Sheridan of investinglive.com