The euro and Japanese yen gained against the U.S. dollar on Thursday as major central banks kept interest rates unchanged, reflecting ongoing concerns about inflation fueled by rising oil prices and geopolitical uncertainty in the Middle East. The European Central Bank maintained its benchmark rates while signaling close monitoring of growth and inflation risks, with the euro rising 1.18 percent to $1.1585. The Bank of Japan also held rates steady but maintained its bias toward tighter policy, pushing the yen up 1.4 percent to 157.61 per dollar. The Bank of England kept borrowing costs on hold, supporting a 1.4 percent gain in sterling to $1.34360.
Markets reacted to central bank caution as investors weighed the potential economic impact of oil price surges caused by escalating tensions in the region. Brent crude futures rose 1.18 percent to $108.65 a barrel following attacks on energy infrastructure in Iran and Israel’s strike on the South Pars gas field. Analysts highlighted that higher energy costs could fuel inflationary pressures globally, prompting central banks to balance growth concerns with efforts to maintain credibility in their inflation mandates. The Federal Reserve similarly held rates steady while projecting moderate inflation and steady unemployment, signaling a measured approach amid uncertainty.
The U.S. dollar index, which measures the greenback’s value against a basket of six major currencies, fell 1 percent to 99.20, reversing some of its recent gains as traders rotated into euro and yen positions. Steve Englander, global head of G10 FX research at Standard Chartered, noted that investors are closely monitoring central banks’ credibility and response to inflation risks, with the UK facing elevated pressure as an energy-importing nation. Meanwhile, the Australian dollar rose 0.83 percent to $0.70810 after the Reserve Bank of Australia hiked rates for the second consecutive month, warning that Middle East tensions pose a material risk to the domestic economy.
Other G10 currencies showed varied performance as central banks kept rates on hold. The Swiss franc weakened after the Swiss National Bank maintained rates while signaling potential intervention to curb recent appreciation, with the euro up 0.5 percent against the franc at 0.91285. The Canadian dollar edged slightly lower to C$1.374 per dollar following the Bank of Canada’s hold on key policy rates. Analysts from Goldman Sachs highlighted that central banks emphasized upside inflation risks over growth concerns, reflecting a cautious approach amid ongoing energy shocks and geopolitical uncertainty.
Cryptocurrencies also reflected the market volatility. Bitcoin fell 1.16 percent to $70,407.69, while Ethereum declined 1.92 percent to $2,146.33, mirroring broader risk-off sentiment in financial markets. Analysts suggest that the combination of steady interest rates, rising energy costs, and geopolitical uncertainty is contributing to cautious positioning among investors, with both traditional and digital assets sensitive to headline-driven developments. Currency and commodity markets are expected to remain volatile as traders continue to monitor oil prices, inflation indicators, and central bank signals across the globe.
