Dollar Sinks Some More, Eliciting Hints of Japanese Yen Intervention
December 23, 2025
Across-the-board dollar losses depressed the DXY weighted index of the greenback to an 11-week low. DXY is closing in on a 10% year-on-year decline. Relative to specific currencies, the dollar dropped 0.8% against the kiwi, 0.7% versus the yen, 0.6% vis-a-vis the Australian dollar and 0.4% against the euro, Swiss franc and sterling. Aside from hopes of additional Fed easing next year and some seasonal bias, the dollar’s soft tone today may have been accentuated by published Board minutes of the Reserve Bank of Australia’s policy review earlier this month that reveal that a possible rate hike was considered by officials in reaction to recent inflation data that exceeded their expectations. As is their custom, a review will not be made in January, which is the only month that gets skipped. By the next planned meeting on February 3, sufficient data will have been reported to better inform them if a rate hike is necessary to lower inflation to target.
Going all the way back to the early 1970’s, Japanese officials have had a lower tolerance for exchange rate volatility than their other Group of Seven counterparts. Finance Minister Katayama today backed up earlier grumblings about excessive yen movements with more direct assertions that persistent volatility will be countered with the ready tools available to restore greater 2-sided risk on the yen.
Net stock market movements overnight in Asia were minimal, including no change in the Japanese Nikkei, a 0.1% uptick in China and and 0.1% downticks in India and Hong Kong, but Australia’s market closed up 1.1%. The German Dax is currently up 0.1%, while the British FTSE and Paris Cac are respectively flat and down 0.2%. U.S. stock futures are marginally lower.
Comparatively bigger drops have occurred in 10-year sovereign debt yields, amounting to five basis points in Japan, four pbs in France, Italy and Spain, three bps in the U.K. and Germany, and two bps in the United States. Prices for Bitcoin (down 0.9%) and gold (up 1.1%) have also moved more volatile fashion than equities, as has oil (+1.1%), which is benefiting from domestic and foreign policies of the Trump administration to promote fossil fuels over other sources of energy.
Investors have been perusing a smattering of data reported from other countries while awaiting several U.S. releases today.
Spanish GDP growth last quarter was reconfirmed at the earlier estimates of +0.6% relative to 2Q and 2.8% year-on-year. Over the first three quarters of 2025, Spanish growth of 2.9% has easily outpace expansion in the other largest economies using the euro but has been less than the growth of 3.5% in 2024. Spanish producer prices were 2.5% lower in November than a year earlier, their most deflationary reading in 13 months.
German import prices were lower than a year earlier in November for a second straight month, this time by the most in 20 months (-1.9%). Both imported energy (-15.7%) and the collective figure for all other items (-0.5%) recorded negative 12-month rates of change.
So did Swedish producer prices (-1.4% year-on-year in November).
Consumer price inflation in Singapore matched October’s 1.2%, having bottomed at a 55-month low of +0.3% in August.
Belgian CPI inflation slowed to a 2-month low in December of 2.1%.
Czech consumer sentiment in December was 0.6 points below November’s high for the year but was otherwise the most optimistic reading since late 2019 short before the onset of the Covid pandemic. Czech business confidence dropped to an 8-month low this month.
Investor sentiment toward the Swiss economy had spiked to 10-month high in November but fell back six index points to a 2-month low of 6.2 this month, according to the ZEW expectations index.
U.S. real GDP grew at an annualized 4.3% between 2Q and the third quarter, exceeding expectations by a percentage point if the figures’ accuracy after the federal shutdown shutdown can in fact be trusted. Personal consumption accounted for 2.4 percentage points of the growth in GDP, and net foreign demand accounted for another 1.4 percentage points of it. The core PCE price deflator accelerated by 0.2 percentage points to show an inflation rate of 2.9%, almost a full percentage point above target.This underscores the Fed’s dilemma of meeting a two-goal mandate where the mandates suggest opposite monetary policy responses to one another.
A 0.2% rise of U.S. industrial production last month (+2.5% on-year) also surpassed the market consensus forecast.
But U.S. durable goods orders fell by a sharper than expected 2.2% in October. Core non-defense capital goods orders excluding aircraft fell by 4.4% in the latest month.
Canada’s economic uptick in September was reversed in October. Monthly GDP fell 0.3% following a 0.2% rise in September and exceeded the year-earlier level by only 0.4%. Industrial production in Canada plunged 0.9% in October after September’s rise of 0.8% and was also 0.9% lower than the level in September 2024.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Canadian monthly GDP, German import prices, Japanese Finance Minister Katayama, U.S. GDP and industrial production
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