Micah Jonah, February 2, 2026
The United States dollar held on to recent gains on Monday as a sharp selloff in precious metals unsettled global markets, with investors assessing what monetary policy could look like under a Federal Reserve led by Kevin Warsh.
Currency markets remained relatively calm despite a steep drop in gold and silver prices that triggered a broader risk off mood across equities. Analysts said investors were unwinding profitable positions to meet margin calls following the metals rout.
The dollar index was steady at 97.21, maintaining the one percent gain recorded on Friday after President Donald Trump named Warsh as his preferred choice for the next Federal Reserve chair. Market participants believe Warsh is less inclined towards aggressive interest rate cuts compared with some other contenders, though he is viewed as more dovish than current Fed chair, Jerome Powell.
The euro traded below the 1.20 level at 1.1848, while sterling slipped 0.16 percent to 1.3664 dollars.
Former Federal Reserve vice chair and current PIMCO global economic adviser Richard Clarida said Warsh would inherit a divided Federal Open Market Committee but could still deliver two rate cuts this year, with the possibility of a third depending on inflation trends.
He added that Warsh is likely to be more cautious about using strong forward guidance on the future path of interest rates.
Market pricing continues to reflect expectations of two rate cuts this year, with the first move unlikely before June, when Warsh would assume office if confirmed by the US Senate.
In Asia, the Japanese yen weakened slightly to 154.82 per dollar, pressured by the stronger dollar and comments over the weekend by Prime Minister Sanae Takaichi, who highlighted the perceived benefits of a weaker yen during a campaign speech.
Her remarks contrasted with the position of Japan’s finance ministry, which has recently sought to slow the currency’s decline. Opinion polls suggest Takaichi’s Liberal Democratic Party is on track for a decisive victory in the upcoming lower house election, raising expectations of more expansionary fiscal policies.
Analysts said a strong mandate would give Takaichi greater freedom to pursue stimulus measures, potentially increasing pressure on long term Japanese government bonds and the yen.
Elsewhere, the Australian dollar fell 0.67 percent to 0.6916 dollars amid the broader risk off sentiment, ahead of a Reserve Bank of Australia policy decision expected to result in a rate hike. The New Zealand dollar also declined, slipping 0.37 percent to 0.5997 dollars.
Overall, while financial markets remain volatile following the collapse in precious metals prices, currency movements have so far been relatively contained as investors await clearer signals on US monetary policy direction.
