Gold shot past the $5,000 per ounce mark in early trading on Monday following a turbulent spell in global markets that saw sharp moves across currencies, bonds and commodities. The rise in precious metals came as investors assessed escalating tensions involving Greenland and renewed U.S. pressure on Iran, developments that have lifted demand for safe-haven assets.
The yen firmed about 0.5% to 154.84 per dollar as of 0052 GMT after dramatic intraday spikes on Friday prompted renewed speculation that authorities could step in to stem the currency's weakness. Market participants were further unsettled after the New York Federal Reserve conducted rate checks on Friday, according to sources, an action that traders often interpret as a prelude to coordinated intervention. That prospect has increased the perceived likelihood of joint measures between the United States and Japan to arrest the yen's slide.
Marc Chandler, chief market strategist at Bannockburn Capital Markets in New York, captured market sentiment, noting: "The cat-and-mouse game with the yen is likely to carry over to the new week’s activity, but the one-way market has been broken, at least for the time being." His commentary highlighted how traders now view the yen's path as less unilateral than it had been in previous sessions.
Equity markets were pressured in early Asian trade. Japan's Nikkei index fell 1.6% in early trading, while S&P 500 futures were down 0.4% and Nasdaq futures dipped 0.7% as investors awaited the Federal Reserve's policy decision later in the week. The pending Fed meeting has become a focal point for players assessing the outlook for rates and liquidity, with market attention heightened amid other sources of uncertainty.
Political developments also weighed on sentiment. U.S. President Donald Trump provided short-term market relief last week by backing away from tariff threats and by downplaying the prospect of forceful action over Greenland. Yet, at the same time, intensified sanctions aimed at Iran have reinforced risk aversion. Increased U.S. pressure on Iran is being cited as a factor supporting higher oil prices and boosting demand for gold, which acted as a refuge amid the unsettled environment. Precious metals broadly, including silver, have experienced a strong rally so far this year.
Yen moves spur intervention chatter
Japanese officials declined to comment directly on the currency's wild swings, but sources said the Federal Reserve's rate checks on Friday kept traders wary that intervention could occur at any time. Prime Minister Sanae Takaichi said on Sunday that her administration would take necessary steps against speculative market activity, signaling a lower tolerance for pronounced currency moves.
Michael Brown, senior research strategist at Pepperstone, explained the significance of the rate checks: "Rate checks are typically the last warning before interventions take place," he said, adding that the Takaichi government appears to "have a much, much lower tolerance for speculative FX moves than their predecessors." Brown warned that the balance of risk and reward has shifted for those holding short yen positions: "The risk/reward has now tilted massively out of the favour of short JPY positions, as nobody will be wanting to run the risk of being caught 5/6 big figures offside if/when the MoF, or their agents, do indeed pull the trigger."
Last week's steep rout in Japan's bond market had brought focus onto Ms. Takaichi's expansionary fiscal stance, particularly after she called a snap election scheduled for February 8. Although the bond market had calmed somewhat by Monday, investors remained on edge given lingering uncertainty.
The yen was firmer against several major currencies on Monday, moving away from recent record or multi-decade lows against the euro, Swiss franc and sterling. Charu Chanana, chief investment strategist at Saxo, suggested that the recent rate check style warning might help rebalance positions and reminded traders that there is a defensive line for intervention around the 159-160 area: "With the dollar starting to look softer, this is actually a cleaner window for Japan to lean against yen weakness. Intervention works better when it’s going with the broader USD tide, not fighting it."
Elsewhere in the currency space, the dollar index - which measures the U.S. currency against six rivals - hovered near a four-month low at 97.224 after a 0.8% slide on Friday, its biggest one-day fall since August. The softer dollar backdrop contributed to a currency environment more conducive to Japanese authorities acting against further JPY weakness.
Commodities and policy risks
Commodities were mixed. Oil prices eased slightly on Monday after a roughly 3% rise on Friday as traders digested the potential impact of U.S. efforts to impose additional sanctions on vessels transporting Iranian crude. Brent crude futures were at $65.74 a barrel, down 0.18%, while U.S. West Texas Intermediate crude slipped 0.2% to $60.92 per barrel.
On the policy front, the Federal Reserve meeting later in the week looms large. The central bank is expected to hold interest rates steady, but the session is unfolding under the shadow of a Trump administration criminal investigation of Fed Chair Jerome Powell, whose term ends in May. That investigation has added an unusual dimension to what is typically a market-focused policy event.
Investors entering the week face a confluence of forces - currency intervention risk, ongoing geopolitical tensions, the stabilization of Japan's bond market following last week's volatility, and a major U.S. central bank meeting - all of which are shaping asset prices from equities to metals and energy markets.