
On January 15, the New York forex market displayed a complex trend influenced by various factors. Although the dollar index fell to a one-week low following the release of U.S. core inflation data, it was later supported by buying at lower prices, narrowing the loss from 0.6% to 0.2%. Meanwhile, the yen rose over 1% against the dollar, making it the strongest performer among G10 currencies.
Dollar Index Narrowed Losses
The dollar index initially fell under pressure as the core CPI (Consumer Price Index excluding food and energy) rose only 0.2%, less than the market's expectation of 0.3%. However, as buying interest emerged, the losses were gradually trimmed. The overall CPI rose by 0.4% month-on-month, in line with expectations, indicating a continued cooling of inflation.
David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, told Bloomberg TV: “Solid economic growth, stable unemployment, and gradually declining inflation will support the medium-to-long-term performance of the dollar.”
Yen Achieves Biggest Single-Day Gain of the Year
The yen surged 1.3% against the dollar, narrowing some gains after hitting a low of 155.95. Bank of Japan Governor Kazuo Ueda expressed optimism about wage growth during a New Year event, while Deputy Governor Ryuzo Himino hinted at a potential rate hike discussion at next week’s policy meeting. This statement fueled market expectations for a shift in the Bank of Japan's monetary policy.
Swap trading indicates that the probability of the Bank of Japan raising interest rates on January 24 has climbed to 73%, significantly higher than 40% at the start of the year. The Nomura Economic Research team noted in a report: “Unless there is a significant economic surprise or a surge in market risk aversion, the likelihood of a rate hike next week by the Bank of Japan is very high.”
Euro and Other Major Currencies Performance
The euro against the dollar was up and down, ultimately falling 0.1% to 1.0294. Earlier data showed a surprising cooling in UK inflation in December, causing market turbulence, as the pound rose 0.1% against the dollar to 1.2231.
Risk-sensitive currencies like the Australian dollar and Scandinavian currencies led the G10, with the Australian dollar rising 0.5% against the dollar to 0.6225 and the dollar falling 0.5% against the Norwegian krone to 11.31. The dollar held steady against the Swiss franc at 0.9125, with market sentiment relatively calm.
Bond Market and Market Expectations
Yields on U.S. 3-10 year Treasuries fell more than 10 basis points intra-day, reflecting increased expectations of a slowdown in U.S. economic growth. Meanwhile, the one-week implied volatility of the EUR/USD fell back to 10.58 from previous highs, indicating a trend toward market stability.
Summary
Overall, forex market volatility was largely driven by inflation data and central bank policy expectations. The dollar, though briefly pressured, eventually showed resilience through dip buying; the yen stood out with strong performance driven by policy shift expectations. Future market focus will be on monetary policy decisions by the Federal Reserve and the Bank of Japan.

