The DXY Index rose for a third day by 0.4% to almost 99. Most of the overnight gains were driven by the JPY’s 0.8% depreciation following Sanae Takaichi’s historic victory as Japan’s first female prime minister, which could turn out to be a “buy the rumour, sell the fact” event for the JPY. Takaichi’s political manoeuvres that secured her premiership may prove less effective in building the consensus with the Liberal Democratic Party’s rival factions and new coalition partner, as well as the opposition parties, needed to advance her pro-growth policy agenda. For now, USD/JPY has a resistance around 152 while EUR/USD has a support at 1.16. The losses in the European currencies were less pronounced – CHF (-0.5%), EUR (-0.4%), and GBP (-0.3%) – cushioned by expectations of Fed cuts against the unchanged rate outlook of European central banks for the rest of 2025.
The CAD bucked the sell-off in the DXY basket of currencies with a mild gain of 0.1%, supported by Canada’s stronger-than-expected inflation. CPI inflation quickened to 2.4% YoY in September vs. the consensus for a slower rise to 2.2% from 1.9% in August. However, expectations remain intact for the Bank of Canada to deliver its final 25-bps rate cut to 2.25% on October 29. In the BOC’s latest surveys, two-thirds of consumers expect a recession over the next year, with most firms not planning to hire more staff. Businesses also expected weak demand to limit the ability to pass on price increases from higher input costs.
In the rest of Asia, the KRW matched the JPY’s 0.8% depreciation, while the Kospi joined the Nikkei 225 in posting a fresh lifetime high. USD/JPY and USD/KRW have been tracking each other on a year-to-date indexed basis since mid-year. The KRW’s high correlation with the JPY reflects their shared sensitivity to the US trade and monetary policies, global risk appetite, and China’s growth cycle.
The Asian currencies most resilient to the JPY’s weakness were the INR (0%), CNY (0%), VND (0%), MYR (-0.1%), IDR (-0.1%), and PHP (-0.1%). Coincidentally, India is a founding BRICS member like China. Indonesia became the first Southeast Asian country to gain full BRICS membership this year, while Malaysia, Thailand, and Vietnam were granted partner country status. China has been fixing the central parity rate below 7.10 after returning from the Golden Week holiday, showcasing confidence in the Chinese Communist Party’s Fourth Plenum (October 20-23), a closed-door meeting focused on drafting the 15th Five-Year Plan (2026-2030). President Xi Jinping also reasserted authority over the military and projected stability ahead of the plenum and a possible meeting with US President Donald Trump.
As for gold, markets are treating its 6% sell-off overnight as a natural pull-back from its remarkable 65% rally this year. Gold consolidated in May-August after a 30% rally in the first four months.
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October 22 in history
In 2019, Japanese Emperor Naruhito alongside Empress Masako formally ascended to the throne of the world's oldest monarchy.
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