A wave of selling hit major currencies including the Japanese Yen, Euro, British Pound, and New Zealand Dollar, as traders responded to shifting central bank expectations and surging government bond yields across key economies. The Japanese Yen weakened after the Bank of Japan (BoJ) published its September meeting summary, leading traders to halve their bets on an October rate hike. The BoJ had previously raised its rate to 1.25% on September 18 by a 7-2 vote, with analysts now expecting the next hike in December rather than October. USD/JPY traded just above 158.00, heading for its third consecutive weekly gain, as traders favored the US Dollar amid geopolitical tensions and a widening US-Japan rate gap [1].
The Euro also faced heavy selling, with EUR/USD falling to its lowest since May 2025. This came as France unveiled a 2027 budget aimed at reassuring investors, but the yield gap between French and German 10-year bonds widened to 130 basis points, the largest since 2012. The budget includes a freeze on public-sector pay and most pensions to limit the deficit to 5% of GDP. The European Central Bank (ECB) raised its deposit rate to 2.50% on September 10, its second hike this year, but markets are pricing in further increases due to inflation forecasts above 3%. The euro area's flash Harmonised Index of Consumer Prices (HICP) for September is forecast at 3.6% year-on-year, with the core rate at 2.5%. A strong inflation reading could increase the odds of an ECB hike on October 29, raising borrowing costs for countries like France [3].
The British Pound slid as UK government bonds sold off, with the 30-year gilt yield surpassing 6% for the first time since 1998. GBP/USD dropped to its lowest since late June. Bank of England (BoE) external member Mann argued that the rise in borrowing costs reflects inflation risk rather than tighter financial conditions, and called for an increase in the UK's Bank Rate from 3.75% to maintain credibility. Markets are pricing in up to four rate hikes by next summer. Despite higher yields, the Pound continued to weaken, as investors sold both bonds and the currency amid inflation concerns and uncertainty over BoE policy [4].
The New Zealand Dollar extended its decline, with NZD/USD trading just above 0.5600, its lowest since the Reserve Bank of New Zealand (RBNZ) last cut rates in November 2025. The RBNZ has since raised rates twice to 2.75%, and traders are betting on a third hike on October 28. However, the narrowing gap between US and New Zealand policy rates, combined with the highest US 10-year Treasury yield since 2002, has kept the Kiwi under pressure. Upcoming US payroll data and New Zealand's business confidence release are seen as the next key events for the currency [2].
Across all markets, upcoming US payrolls data is highlighted as a potential catalyst, with forecasts of 90,000 jobs added after 162,000 in August. Analysts note that strong US data could further strengthen the Dollar and weigh on other currencies, while central bank policy meetings and inflation data remain in sharp focus [1][2][3][4].
CONCLUSION
Major global currencies are under pressure as rising bond yields and central bank uncertainty drive investors toward the US Dollar. With key inflation and employment data ahead, markets remain volatile and sensitive to policy signals. The prevailing sentiment is negative for non-Dollar currencies, with further moves likely hinging on upcoming economic releases and central bank decisions.