Introduction
In September, we saw
sharp and uneven moves across major currency pairs. The Mexican peso weakened
while the Russian ruble strengthened. The yen gained modestly even as the U.S.
dollar rose against most peers, while the Tasmanian currencies (AUD and NZD)
fell. These shifts reflected the Federal Reserve’s (Fed) monetary policy
stance, higher oil prices linked to the Iran conflict, and differing central
bank signals. In this article, Elev8 broker provides retail traders with market
data and analytics to see more market context so they can respond effectively
to changing conditions.
What happened in
September
The U.S. dollar
dominated the market. The Fed raised rates to 3.75–4.00%, U.S. Treasury yields
reached decades-high levels, while an oil and diesel price shock divided the
currency market into clear winners and losers. The peso fell roughly 6% against
the dollar, with USDMXN moving from about 17.00 to about 18.10. The ruble rose
about 3.5%, with USDRUB falling from about 86.80 to about 83.20. A carry-trade
unwind, following the Fed’s rate increase, weighed on high-yielding currencies
such as the peso. At the same time, oil prices above $100 per barrel supported
the ruble because energy exports remain Russia’s main revenue source.
Mexican peso and
Russian ruble
While the Fed raised
its target range to 3.75–4.00%, the Bank of Mexico held its rate at 6.50%,
narrowing the interest-rate gap between the currencies and easing the demand
for pesos.
The dollar index (DXY)
rose just over 2% in September on hawkish Fed expectations and safe-haven flows
tied to the Iran conflict. The 10-year Treasury yield reached 5.29%, the
highest since 2007, and the 30-year yield hit 5.62%, the highest since 2002. These
attractive levels pulled capital toward dollar assets. Furthermore, a fourth
round of U.S.-Mexico trade talks was postponed from late September to October,
which added extra pressure.
In contrast, the
Russian ruble (RUB) gained more than 3% against the U.S. Dollar. Because of the
ongoing blockade in the Strait of Hormuz, Brent crude stayed above $100 per
barrel for most of September. As a result, high energy export revenue
strengthened Russia’s current account balance and sustained demand for the
ruble. Extended ruble payment rules for foreign gas buyers and capital controls
provided additional currency support.
In short, the Fed’s
hawkish move, high oil prices, and risk-off sentiment hurt high-yielding
currencies such as the peso, while boosting oil-linked currencies such as the
ruble.
Japanese yen
The yen appreciated by
about 1.5% against the U.S. dollar in September, with USDJPY falling from about
160.00 to about 157.00. Overall, however, it was a truly roller-coaster month
for the Japanese currency, and at one point USDJPY traded as low as 153.00
before recovering again. Yen was one of the stronger G10 currencies, even
though the dollar gained against most peers.
The Bank of Japan
(BoJ) raised its policy rate by 25 basis points (bp) to 1.25% on 18 September,
the highest level since 1995. The vote was 7 to 2. The yen first weakened on
the day because limited forward guidance disappointed some traders, and USDJPY
jumped 1.2% to 157.90. Over the following days, markets treated the move as
part of a longer normalisation path and began to price in further rate
increases.
Additionally, a threat
of intervention hangs over the yen. Japanese authorities conducted rate checks
on 18 and 19 September, and USDJPY retreated from 158.00. On 28 September, top
currency
diplomat Atsushi Mimurasaid markets should treat
U.S. and Japanese warnings on yen weakness as credible. Indeed, Finance
Minister Katayama and U.S. Treasury Secretary Bessent reaffirmed that the yen’s
undervaluation is a matter of concern. The July joint intervention remained in
traders’ minds and capped USDJPY near 158.00.
Finally, higher oil
prices also added to Japanese inflation and reinforced the case for further
hikes.
Australian dollar
and New Zealand dollar
The Australian dollar
fell about 3.1%, with AUDUSD moving from about 0.7165 to about 0.6945. It was
one of the weaker G10 currencies despite the Reserve Bank of Australia (RBA)
raising its cash rate by 25 bps to 4.60%, a 15-year high and the fourth hike of
2026. Governor Bullock said the board had considered holding rates and that the
bank was trying to anticipate the effects of earlier hikes. Markets interpreted
the message as a signal of a possible pause. As a result, the chance of a
November hike fell from 44% to 32%, and the chance for a December hike fell
from 60% to 50%.
The same oil rise that
supported the ruble and added to the case for BoJ hikes acted as a drag on the
Aussie. Treasurer Jim Chalmers said the war has been a disaster for the global
economy and that Australian workers are paying a hefty price. Indeed, Australia
is a net energy importer, so oil above $100 worsens its terms of trade, raises
input costs, and increases the risk of an economic recession.
The latest Commitment
of Traders (COT) report showed that large speculators raised their net-short
positions by 20% to 46,814 contracts in the week to 22 September, the largest
since December 2025.
Unlike the RBA (which
hiked to 4.60% on 29 September) and the BOJ (which hiked to 1.25% on 18
September), the Reserve Bank of New Zealand (RBNZ) had no scheduled meeting in
September. Its next Monetary Policy Review is on 28 October. This created
a policy vacuum at precisely the wrong time. While Australia and Japan could at
least point to central bank actions as potential catalysts for currency
support, New Zealand had no such anchor. The market was left to price the kiwi
purely on external forces, and those forces were overwhelmingly negative. As a
result, USDNZD dropped by almost 5%, making it the worst-performing currency
among the majors.
Additionally, dairy is
New Zealand’s largest export category, and September weather forecasts brought
a direct threat to future production. Fonterra, the world’s top dairy exporter,
warned that El Niño could reduce milk volume growth at the end of the
2026–2027 season as the weather phenomenon heightens the risk of extreme
weather events.
What to expect in
October
Elev8 broker
highlights six main themes for traders in October:
- Fed policy direction
- BoJ rate expectations
- Oil market volatility
- Carry-trade position adjustments
- U.S.-Mexico trade negotiations
- Standard economic data releases
First, traders should
watch the odds of the Fed delivering another 25-bps increase at its November
meeting. U.S. Non-farm payrolls (NFP) and September Consumer Price Index (CPI)
will matter, as will comments from Fed officials.
Second, overnight
index swaps priced in a 42% chance of a BoJ hike to 1.50% in October and a 100%
chance for December. Japanese inflation data, political comments about economic
reflation, and intervention risk near 158.00 in USDJPY will be closely watched.
Yen crosses such EURJPY, AUDJPY, and GBPJPY may show a cleaner reaction and
smoother trading environment.
Third, Brent at $102
and the continued Strait of Hormuz disruption remain central. Any change in the
blockade, Houthi activity in Yemen, or statements on the conflict’s length
would move oil and related currencies.
Fourth, the carry
unwind that weakened the peso by about 6.0% may continue if speculative shorts
grow or if equity volatility rises. With U.S. Treasury yields above 5.0%,
emerging market currencies such as the South African rang (ZAR) and high-beta
currencies such as AUD and New Zealand Dollar (NZD) will stay exposed and at
risk of depreciation.
Fifth, the postponed
fourth round of U.S.-Mexico trade talks returns in October. Tariff signals
could add to peso weakness, while a constructive result could support a rebound
given short positioning. The Bank of Mexico held rates at 6.50% but dropped language
that committed it to that level.
Sixth, upcoming U.S.
employment figures and inflation reports, along with China data, will shape
global risk sentiment and will determine the next shift in global rate
expectations.
Key data and events
calendar for October
Source: Elev8
broker
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This article was written by IL Contributors at investinglive.com.