The offshore yuan strengthened to its highest level since July 2022, supported by a series of strong central bank fixings and an expansion of direct currency clearing services ahead of a high-stakes US-China summit.
The spread between short- and long-term Treasury yields narrowed as investors weighed a hawkish Federal Reserve against easing oil prices and signs of diplomatic progress in the Middle East.
The Japanese yen fell to a multi-week low after the Bank of Japan raised interest rates but signaled a cautious approach to future tightening, a move that contrasted sharply with the Federal Reserve's hawkish stance.
UBS strategists have re-entered a long EUR/USD recommendation after a previous position was stopped out, targeting a move to 1.17 based on divergent central bank policies.
The British pound strengthened on Friday, supported by an unexpected rise in August retail sales and a pullback in the U.S. dollar as oil prices eased from recent highs.
Analysts at UBS project the euro will weaken against the British pound, citing a hawkish Bank of England policy stance and a significant interest rate advantage that favors holding sterling.
Strategists at Citi project the euro-to-yen exchange rate will weaken significantly over the coming months, targeting a drop below ¥175 despite the potential for a near-term rebound. The bank's bearish outlook is driven by rising real interest rates in Japan and a potential shift in the USD/JPY pair.
Canadian Prime Minister Mark Carney said he has spoken with U.S. President Donald Trump recently about the conflicts in Ukraine and Iran, according to a Reuters report. The talks come amid an ongoing trade dispute between the two neighboring countries.
The U.S. dollar advanced after August inflation data came in firm, significantly increasing market expectations for a Federal Reserve interest rate hike at its upcoming meeting. Meanwhile, the Japanese yen is poised for a notable two-week gain on speculation of a policy shift by the Bank of Japan.
