The U.S. Dollar Index (DXY00) fell to a six-week low on Thursday, declining 0.91%, pressured by softer-than-expected domestic growth and inflation data alongside suspected Japanese currency intervention that sent the yen soaring.
The greenback extended losses from Wednesday’s Federal Reserve meeting, where rates were held steady. Second-quarter GDP expanded at a 1.5% annualized pace, missing the 2.0% forecast, while the June core PCE price index—the Fed’s preferred inflation gauge—cooled to 3.3% year-over-year from 3.4%, matching expectations. Personal spending rose 0.3% month-over-month, below the 0.4% estimate, though May’s figure was revised up to 0.9%. Initial jobless claims increased by 9,000 to 197,000, beating the 200,000 consensus and signaling continued labor market resilience.
Markets now price a 60% probability of a 25-basis-point rate hike at the September 15–16 FOMC meeting.
The euro climbed 0.48% to a six-week high against the dollar, bolstered by Eurozone Q2 GDP growth of 0.4% quarter-over-quarter and 1.0% year-over-year, both exceeding forecasts. The July economic confidence indicator rose to a five-month high of 96.9. German harmonized CPI accelerated to 2.8% year-over-year in July. Traders see an 84% chance of a 25-basis-point ECB hike at the September 10 policy meeting.
USD/JPY plunged 2.52% as the yen surged to a 2.5-month peak on signs that Japanese authorities intervened to support the currency. The move was amplified by dollar weakness post-FOMC and a better-than-expected July consumer confidence reading in Japan. Short covering ahead of Friday’s Bank of Japan meeting—where rates are widely expected to remain at 1.00%—added fuel to the rally. The BOJ’s policy rate remains well below the Fed’s 3.50%–3.75% target range.
August COMEX gold rose 1.45% to $58.50 higher, while September silver gained 0.58%. Precious metals benefited from the dollar’s slide and the Fed’s pause, with safe-haven demand lifted by escalating Middle East tensions after U.S. forces struck Iranian targets and Iran retaliated with drone and missile launches. Gains were capped by a rallying equity market and higher Treasury yields. ETF data showed gold holdings at a 10-month low and silver at a one-year low, though China’s central bank added 480,000 ounces to reserves in June, marking the 20th consecutive month of accumulation.
