2025

By Ankur Banerjee

SINGAPORE, Dec 23 (Reuters) – The yen advanced amid broad U.S. dollar weakness in the Asian trading session on Tuesday after the severest warning yet from authorities signaling Tokyo’s readiness to intervene, as the Japanese currency hovered near recent lows against major peers. 

The threat of intervention is keeping yen bears at bay for now, although near-term yen weakness is likely to persist, analysts say, as the cautious tone from the Bank of Japan last week hinted at a slow pace of rate hikes next year. 

The yen appreciated 0.7% to 156.00 per U.S. dollar, extending its gains from the previous session and retracing most of the losses sustained since Friday after the BOJ delivered a well-telegraphed rate hike. 

The yen also appreciated 0.5% against the euro, the Australian dollar and sterling on Tuesday, but hung around recent lows.

Japanese Finance Minister Satsuki Katayama said Japan has a free hand in dealing with excessive moves in the yen, the latest jawboning from authorities and the strongest indication yet that Tokyo was ready to intervene.   

Matt Simpson, senior market analyst at StoneX, said if Japanese authorities have any intention of intervening at all, “the low-liquidity period between Christmas and New Year would give them the most bang for their yen, so to speak.”

“I’m just not convinced they need to, unless we see a volatile breakout above 159. Volatility levels were higher in 2022, when traders were seemingly goading the Ministry of Finance into action, yet that seems lacking this time around.”

Japan intervened in 2022 as well as in 2024 to support the yen. 

Japanese government bonds pared gains after Reuters reported Tokyo’s new debt issuance for fiscal 2026 is likely to slightly exceed the 28.6 trillion yen ($182 billion) sold during the current fiscal year, citing three sources with direct knowledge of the matter. The government is expected to finalise the fiscal 2026 draft budget on Friday.

The drop in the yen has come in the face of dollar weakness after the Federal Reserve earlier this month cut interest rates and projected another cut in 2026, although traders are pricing in two more rate cuts from the Fed next year. 

Charu Chanana, chief investment strategist at Saxo, said a slow BOJ hiking cycle and potential Fed easing in 2026 point to less one-way yen weakness and a better chance of range trading with yen strength likely when U.S. yields fall or risk sentiment turns.

“Biggest risk will be if U.S. stays ‘higher-for-longer’ and BOJ turns cautious again with key catalysts ahead being the Shunto wage negotiations as well as U.S. rates,” Chanana said.

DOLLAR DRIFTS IN DECEMBER

The dollar too remained under pressure, with the euro 0.1% firmer at $1.1776 and sterling rising 0.2% to a two-and-a-half-month high of $1.3489.

The dollar index, which measures the U.S. currency against six rivals, slid 0.2% to 98.061 on Tuesday, extending losses into a second day after dropping 0.5% on Monday. The index is on course for a 1.4% decline for the month and a 9.6% drop for the year, its steepest annual fall since 2017.

Strategists at MUFG said the drop for the dollar this year is unlikely to be a one-off with scope for further gains ahead. “We essentially believe the U.S. dollar has peaked and we are now in a multi-year downtrend for the dollar,” they said in a note. 

Investor focus will be on U.S. GDP data due later on Tuesday. The data was delayed by the 43-day government shutdown and is now outdated, with markets unlikely to be swayed too much by it. 

The data will likely confirm what economists call a K-shaped economy in which higher-income households are doing well, while middle- and lower-income are barely staying afloat. 

GDP likely increased at a 3.3% annualised rate last quarter, a Reuters survey of economists estimated. The economy grew at a 3.8% pace in the second quarter. 

“A print above 3% would confirm that the U.S. economy was on solid footing before the government shutdown began on October 1,” said Tony Sycamore, market analyst at IG.

In other currencies, the Australian dollar climbed 0.2% to $0.6669, while the New Zealand dollar was 0.3% higher at $0.5814. The Swiss franc firmed 0.4% to a six-week high of 0.7895 per U.S. dollar.

(Reporting by Ankur Banerjee in Singapore; Editing by Muralikumar Anantharaman and Stephen Coates)

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By Marc Jones

LONDON, Dec 23 (Reuters) – Most investors knew this year would be different given U.S. President Donald Trump’s return to power in the world’s biggest economy, but few predicted how wild the ride would get, or the end results.

World stocks recovered from April’s “Liberation Day” tariffs crash to add another 20% in their sixth year of double-digit gains in the last seven, but look elsewhere and the surprises jump out.

Gold, the ultimate safe port in a storm, is set for its best year since 1979, the U.S. dollar is down nearly 10%, oil off almost 17%, yet the junkiest of junk bonds have soared in the debt markets.

The “Magnificent Seven” U.S. tech giants seem to have lost some of their sparkle since artificial intelligence darling Nvidia became the world’s first $5 trillion company in October, and bitcoin has suddenly lost a third of its value too.

DoubleLine fund manager Bill Campbell described 2025 as “the year of change and the year of surprises”, with the big moves all “intertwined” in the same seismic issues – the trade war, geopolitics and debt.

“If you were to tell me a priori that Trump was going to come in and use very aggressive trade policies and sequence it the way he has, I would not have expected valuations to be as tight or lofty as they are today,” Campbell said.

A near 60% boom in European weapons makers’ stocks has been driven by Trump too, following signals he will scale back Europe’s military protection forcing the region – and other NATO members – to rearm. 

That’s also helped drive the best year for European bank stocks since 1997, while there’s also been the 70% leap in South Korean stocks and near-100% returns on defaulted Venezuelan bonds.

A trio of U.S. rate cuts, Trump’s criticisms of the Federal Reserve and broader debt worries have all impacted bond markets.

Trump’s “big, beautiful” spending plans led the 30-year U.S. Treasury yield to surge past 5.1% to its highest since 2007 in May, and though it is now back at 4.8%, the re-expanding gap to short-term rates that bankers dub “term premia” is causing jitters again.

Japan’s 30-year yields are back near a record high too. The juxtaposition here is bond market volatility is at a four-year low and local-currency emerging market debt has had its best year since 2009.

AI is all part of the debt mix too. Goldman Sachs estimates the big AI “hyperscalers” have spent nearly $400 billion this year and will spend almost $530 billion next year.

ALL THAT GLITTERS

Gold’s near 70% surge is its biggest jump since 1979 and precious peers silver and platinum are up an even more dazzling 130%.

In crypto, Trump launched a memecoin and gave a presidential pardon to Binance founder Changpeng Zhao. Bitcoin hit an all-time high above $125,000 in October but then crashed to $88,000 and will end the year down around 5.5%.

The dollar’s near 10% drop, meanwhile, leaves the euro up 14%, the Swiss franc and Swedish crown 14.5% and 19% higher respectively, while the yen is flat for the year.

Trump’s re-engagement with Russian President Vladimir Putin has helped the rouble surge almost 36%, although it remains heavily restricted by sanctions and just leads the 28% tear from gold producer Ghana’s cedi.

Poland’s zloty, the Czech crown and Hungarian forint are all between 15% and 20% stronger. Taiwan’s dollar jumped 8% in just two days in May, and Mexico’s peso and Brazil’s peso have both shrugged off the trade war drama to score double-digit gains.

“We don’t think this is just a short-term phenomenon,” said Jonny Goulden, head of EM fixed income strategy research at J.P. Morgan. “We think a bear market cycle for EM currencies that has lasted for 14 years now, has turned here.”

Argentina has been another standout. Its markets got hammered when President Javier Milei suffered a thumping regional election defeat in September, but then went wild weeks later when a $20 billion pledge from Trump helped Milei romp national midterms.

NEW YEAR, NEW FEARS

It won’t be a quiet start to next year either.

Trump is already revving up for midterm elections in November and is expected to name his new head of the Federal Reserve shortly, which could be crucial for the central bank’s independence.

Europe and Asia will see how the French, British and Japanese governments – and their bond markets – fare, and whether Prime Minister Viktor Orban can hang on to power in Hungary in April.

Israel will hold elections in the months after, which will keep the fragile Gaza peace in focus, while Colombia and Brazil have crucial elections starting in May and October respectively.

And then there are all of the AI unknowns.

Satori Insights founder Matt King said markets are going into 2026 in a “remarkable” situation in terms of valuations and with leaders like Trump “looking for excuses” to give voters money through stimulus or tax breaks.

“There’s just this ongoing risk that we are pushing the limits of what easy money can do,” King said.

“Already you are starting to see the cracks appearing around the edges, in terms of growth of term premia (in the bond market), in terms of bitcoin suddenly selling off and in terms of the ongoing gold rally.”

(Reporting by Marc Jones in London; Additional reporting by Elizabeth Howcroft in Paris; Editing by Jamie Freed)

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