Yen climbs as gold plunge triggers market volatility

Sterling was last unchanged at $1.3368 ahead of the release of inflation data for September due later today.

The U.S. dollar weakened in early Asian trade on Wednesday, edging back from its highest level against the Japanese yen in a week, as a tumble in gold prices triggered a rebalancing across various safe-haven assets.

Gold fell as much as 2.9% to a low of $4,003.39 amid a broad decline in precious metals, retracing a rally that has seen the yellow metal’s biggest yearly gains in almost half a century.

”What goes up has to go down,” said Alex Hill, managing director at Electus Financial Ltd in Auckland. ”You’ve had a market that’s gone parabolically higher, at some point it’s going to get some relief.”

The U.S. dollar was last 0.2% weaker at 151.67 yen, after the release of data showing Japanese exports rose in September for the first time in five months.

The yen has lost 2.5% this month, its biggest monthly decline against the greenback since July, as Sanae Takaichi jostled to become Japan’s prime minister and investors anticipated expansionary fiscal policy and a testy relationship with the country’s central bank.

While volatility has erupted over the past few weeks in cryptocurrencies, U.S. regional banks and now gold, the U.S. dollar has remained relatively stable, said Tony Sycamore, market analyst at IG in Sydney.

”We’re seeing an increase in volatility,” he said. ”Positioning is crowded in so many asset classes that it’s causing these flare-ups.”

The dollar index, which measures the greenback’s strength against a basket of six currencies, was last trading unchanged at 98.888, slipping 0.1% after three consecutive days of gains. President Donald Trump on Tuesday rebuffed a request by top Democratic lawmakers to meet until the three-week-old U.S. government shutdown ends.

The Federal Reserve will lower its key interest rate by 25 basis points next week and again in December, according to a Reuters poll of economists who remain deeply divided on where rates will be by the end of next year.

Fed funds futures imply a 98.9% probability of a 25-basis-points cut to interest rates at the central bank’s meeting on October 29, compared with a 99.4% chance yesterday, according to the CME Group’s FedWatch tool.

The euro was trading 0.1% stronger at $1.1606 as a planned summit between President Trump and Russian leader Vladimir Putin was put on hold after Russia rejected an immediate ceasefire in Ukraine.

Sterling was last unchanged at $1.3368 ahead of the release of inflation data for September due later today.

The Australian dollar was steady at $0.6491, while the kiwi dollar was flat at $0.5745.