Global FX: Yen Volatility Spikes as US-India Trade Defrosts

Currency markets displayed mixed signals this week, characterized by extreme volatility in the Japanese Yen and shifting trade policy narratives between major economies.

JPY Instability

The Japanese Yen (JPY) has endured a turbulent start to 2026. According to NAB analysts, the currency has traded in a wide accumulation band between 153.00 and 159.00 against the dollar.

The volatility highlights the ongoing struggle between the Bank of Japan's slow normalization process and external pressure from US Treasury yields. The failure of the Yen to break significantly below 153 suggests that despite potential intervention threats, the interest rate differential remains a dominant driver for carry traders.

Eurozone and India Trade Outlooks

In Europe, BNP Paribas released a forecast projecting a return to robust growth for Germany in 2026. The bank cites approved infrastructure spending as a key driver, though they note 2025 will likely remain a recovery transition year. This offers a glimmer of hope for EUR bulls playing the long game, suggesting the Eurozone's engine may finally restart after years of stagnation.

Meanwhile, trade friction appears to be easing in emerging markets. Societe Generale reports that the US is poised to reduce tariffs on Indian goods from 50% to 18%, with India expected to reciprocate by eliminating tariffs on US goods. If ratified, this deal would be a significant boost for the Indian Rupee (INR) and suggests Washington is prioritizing economic alliances in Asia to counter regional competitors.

Market Data Snapshot

• JPY Trading Band: 153.00 - 159.00
• US Tariff Reduction Forecast for India: 50% → 18%
• Key Growth Timeline: Germany/Eurozone recovery projected for 2026