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January 2024 has marked a significant shift in currency markets, with the Japanese yen leading gains and set for its best January since 2018, appreciating 1.6% despite some late-month weakness.
This boost comes from growing expectations of further Bank of Japan rate hikes, supported by Tokyo’s core inflation hitting 2.5% and positive signals from BOJ officials. Meanwhile, North American currencies face uncertainty as President Trump’s February 1 deadline for imposing 25% tariffs on Mexican and Canadian imports approaches.
The Canadian dollar has touched five-year lows, while the Mexican peso is experiencing its worst weekly performance since October. The broader currency landscape shows mixed signals, with the ECB cutting rates and leaving room for further easing, while the Federal Reserve maintains a cautious stance on rate cuts.
The dollar index, though firm ahead of the tariff deadline, is headed for a monthly loss of 0.3%, reflecting the complex interplay of monetary policy decisions and geopolitical tensions shaping currency markets.
