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The FX markets faced sharp swings at the start of the week following US visa policy changes, central bank decisions, fiscal policy risks and geopolitical tensions.
Traders remained cautious as volatility continues to impact currencies. Precious metals broke through record highs again as markets sought safe-haven demand.
Indian Rupee Faces Pressure from US Visa Policy Changes
USD/INR rose to 88.75 after the US government announced a one-time fee of $100,000 for new H-1B visa applications. This policy mostly targets Indian tech companies, which heavily rely on doing business with US companies. ⁽¹⁾
The US government aims to maintain the H-1B program to prioritize American jobs, with President Trump also planning to revise wage levels for H-1B workers, which could increase costs for Indian firms and hurt profits. India’s Commerce Minister Goyal is set to visit Washington for trade talks hoping to address these concerns. ⁽²⁾
Source: TradingView, USD/INR Chart
US Dollar Halts 4-Day Gains
The US dollar index pulled back from weekly highs at 97.8 after advancing for a fourth straight session as traders await fresh signals from Federal Reserve officials and a key US inflation report this week after the Fed cut rates last week.
Fed Chair Jerome Powell and approximately nine other policymakers are scheduled to speak this week, with markets closely tracking their guidance on the rate outlook. ⁽³⁾
The US dollar also rose last week after President Trump said he held a productive call with his Chinese counterpart Xi Jinping. Trump announced on his Truth Social platform that a deal over the future of TikTok’s US operations was approved following a call with Xi on Friday. ⁽⁴⁾
Traders will now be focused on the upcoming final GDP report for Q2 which is due on Thursday, September 25th and the Core PCE Index on Friday, September 26th, expected to show relatively tame price pressures.
Source: TradingView, DXY Chart
Pound Sterling Remains Under Pressure from Fiscal Concerns
Pound sterling remained under pressure near 1.35, trading near 2-week lows at 1.346 as traders and investors continued to remain cautious due to the UK’s rising public sector debt, which reached £18 billion in August, far above expectations of £12.5 billion. The rise in debt has raised more concerns ahead of November’s Autumn Budget, with 30-year gilt yields climbing to record highs. ⁽⁵⁾
The Bank of England announced its latest interest rate decision last week and kept rates unchanged at 4% in a 7-2 vote. The central bank also slowed its quantitative tightening to £70 billion.
The BOE reiterated that it will continue to stay cautious when it comes to monetary policy, with the MPC decision coming after UK inflation showed flat readings in August. CPI remained above the BOE’s 2% target at 3.8%. ⁽⁶⁾
The BOE said that it remains alert to the risk that this temporary increase in inflation could place additional upward pressure on the wage and price-setting process.
Source: TradingView, GBP/USD Chart
Chinese Yuan Stabilized on Policy and Trade Talk Optimism
The Chinese Yuan stabilized following eased trade tensions between China and the US and the PBOC’s decision to keep interest rates unchanged, with the 1-year loan prime rate remaining at 3%. ⁽⁷⁾
Despite the recent Fed rate cut, Chinese authorities avoided major stimulus, due to the recent stock market rally. However, the PBOC will continue to monitor economic data as they indicate signs of weakness.
Source: TradingView USD/CNH Chart
Japanese Yen Rises Slightly
The Japanese Yen rose slightly against the US dollar as the Bank of Japan kept rates unchanged at 0.5% for five meetings straight, stating a moderate economic recovery but warned of global trade risks.
The BOJ also plans to sell its ETF and J-REIT (Real Estate Investment Trust) holding, signaling a reduction in asset holdings. ⁽⁸⁾
Traders await Japan’s PMI on Wednesday, the BOJ’s meeting minutes on Thursday, and Tokyo inflation data on Friday for clues on future policy.
Source: TradingView, USD/JPY Chart
Precious Metals Hit Record Highs Again
Gold and silver continue to break through record highs, driven by further rate cut expectations from the Federal Reserve and geopolitical tensions. The Fed’s recent cut and expectations of two more rate cuts this year have contributed to gains in gold, leading to a 40% surge in 2025.
Gold broke above $3,750 due to also from central bank purchases, geopolitical tensions including the Russia-Ukraine war, economic concerns and high ETF inflows while silver traded at $44, reaching a 14-year high due to strong demand from solar, electric vehicle and electronics, despite a tight supply.
Source: TradingView, Gold Chart
