This week, the US Dollar’s decline is linked to expectations of lower rates due to the Federal Reserve’s dovish stance, not geopolitical factors. The Japanese yen has shown strong performance against high-beta currencies like the Swedish krona.

The US Thanksgiving holiday has led to thinner liquidity, which might create opportunities for intervention in the USD/JPY exchange rate by Japanese authorities. However, they may prefer to act after a USD-negative data event, and the current situation might reduce urgency for intervention.

Usd Correction Against Other Currencies

Despite the US Dollar’s correction, it remains overpriced against G10 currencies. Limited room for further dovish repricing suggests a neutral stance towards the USD during the Thanksgiving period.

In related market movements, the EUR/USD is steady around 1.1600 amid low volatility following Thanksgiving. GBP/USD has seen a correction after reaching fresh highs, with a lack of clear direction. Gold faces mild pressure due to thin trading amid the holiday. Meanwhile, Bitcoin climbs above $91,000, while Ethereum and XRP face challenges despite a weakening bearish trend.

With Thanksgiving resulting in market closures, UK and European indices have drifted slightly lower, with a focus on the UK budget review. Ripple (XRP) struggles to gain momentum, unable to surpass resistance levels.

The US dollar is weakening as we approach December, and this seems driven more by the Federal Reserve’s dovish stance than by any major geopolitical event. October’s core inflation data came in softer than expected at 2.8%, reinforcing the market’s view that the Fed’s next move in 2026 will be a rate cut. We see this as a fundamental shift in rate expectations, not a temporary rotation.

Currency Market Implications

With US markets quiet for the Thanksgiving holiday, the thin liquidity creates a prime environment for intervention in USD/JPY. The pair has been hovering just above the 152 level, a line that has historically drawn sharp warnings from the Ministry of Finance. A sudden move by Japanese authorities to strengthen the yen could catch the market off guard in these low-volume conditions.

For options traders, this setup suggests implied volatility may be too low. The VIX is sitting near 14, indicating a great deal of complacency in the market. Buying out-of-the-money puts on USD/JPY for the coming weeks could be a cheap way to position for a sharp, intervention-driven correction.

We are also seeing the Japanese yen outperform high-beta currencies, which is a classic signal of a risk-off move driven by lower global rate expectations. This pattern suggests that a long yen position is not just a bet against the dollar, but a broader play on slowing global growth. The yield differential that has punished the yen for years is finally showing signs of narrowing.

Looking back to the post-pandemic years of the early 2020s, we saw similar dollar corrections when the market began to price in a more dovish Fed. The pattern of a strong dollar rally followed by a sharp turn on shifting rate policy is a familiar one. History suggests that once this repricing begins, it can have significant momentum into the new year.

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