Elev8 Broker's October Forex Breakdown: Key Currency Moves

Overview

September brought sharp and varied movements in major currency pairs. The Mexican peso depreciated, while the Russian ruble appreciated. The yen saw modest gains as the US dollar strengthened against most other currencies, but the Australian and New Zealand dollars declined. These moves were driven by the Fed's monetary policy, elevated oil prices due to the Iran conflict, and mixed signals from central banks. This analysis from Elev8 broker offers retail traders market data and analytics to better understand the context and adapt to changing conditions.

September's market developments

The US dollar was the dominant force. The Fed hiked its rate to 3.75–4.00%, pushing US Treasury yields to multi-decade peaks, while a shock from oil and diesel prices split the currency market into distinct winners and losers. The peso lost roughly 6% versus the dollar, as USDMXN climbed from around 17.00 to about 18.10. The ruble gained about 3.5%, with USDRUB dropping from approximately 86.80 to 83.20. An unwind of carry trades, triggered by the Fed's rate rise, pressured high-yielding currencies like the peso. Meanwhile, oil prices above $100 a barrel buoyed the ruble, given that energy exports remain Russia's main revenue source.

Mexican peso and Russian ruble performance

The Bank of Mexico kept its rate at 6.50% even as the Fed hiked to 3.75–4.00%, reducing the interest-rate differential between the two currencies and dampening demand for the peso.

The dollar index (DXY) advanced just over 2% during September, driven by hawkish Fed expectations and safe-haven demand linked to the Iran conflict. The 10-year Treasury yield climbed to 5.29%, the highest level since 2007, while the 30-year yield reached 5.62%, a peak since 2002. These elevated yields attracted capital into dollar-denominated assets. Additionally, the postponement of the fourth round of US-Mexico trade talks from late September to October added further pressure.

By contrast, the Russian ruble (RUB) strengthened more than 3% against the US dollar. Brent crude remained above $100 a barrel for most of September due to the ongoing blockade in the Strait of Hormuz. Consequently, high revenue from energy exports improved Russia's current account balance and maintained demand for the ruble. Extended ruble payment requirements for foreign gas buyers, along with capital controls, provided extra support.

In summary, the Fed's hawkish tightening, elevated oil prices, and a risk-off sentiment weighed on high-yielding currencies like the peso, while benefiting oil-linked currencies such as the ruble.

Yen appreciation amid intervention threats

The yen strengthened about 1.5% versus the US dollar in September, as USDJPY declined from roughly 160.00 to around 157.00. However, the month was a true roller-coaster for the Japanese currency, with USDJPY dipping as low as 153.00 at one point before rebounding. Despite the dollar's broad gains, the yen was among the stronger G10 currencies.

On 18 September, the Bank of Japan (BoJ) increased its policy rate by 25 basis points to 1.25%, the highest since 1995, by a 7–2 vote. The yen initially weakened on that day as limited forward guidance disappointed some traders, sending USDJPY up 1.2% to 157.90. In the following days, markets interpreted the move as part of a longer normalisation process and began to anticipate additional rate increases.

Moreover, the risk of intervention continues to loom over the yen. Japanese authorities performed rate checks on 18 and 19 September, prompting USDJPY to pull back from 158.00. On 28 September, top currency diplomat Atsushi Mimura said markets should treat U.S. and Japanese warnings on yen weakness as credible. Finance Minister Katayama and US Treasury Secretary Bessent later reaffirmed that the yen's undervaluation is a concern. The joint intervention in July remained in traders' memory and kept USDJPY capped near 158.00.

Finally, higher oil prices contributed to Japanese inflation, strengthening the argument for further rate rises.

Aussie and kiwi underperformance

The Australian dollar depreciated approximately 3.1%, with AUDUSD falling from around 0.7165 to roughly 0.6945. 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—the Aussie was among the weaker G10 currencies. Governor Bullock noted that the board had considered holding rates and was trying to anticipate the effects of previous hikes. The market read this as a hint of a potential pause. Consequently, the probability of a November hike declined from 44% to 32%, and the probability for December fell from 60% to 50%.

The same oil price increase that supported the ruble and reinforced the case for BoJ hikes weighed on the Australian dollar. Treasurer Jim Chalmers remarked that the war has been a disaster for the global economy and that Australian workers are paying a heavy price. As a net energy importer, Australia faces worsening terms of trade, higher input costs, and an increased recession risk when oil exceeds $100.

The latest Commitment of Traders (COT) report indicated that large speculators increased their net-short positions by 20% to 46,814 contracts in the week ended 22 September, the highest 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) held no scheduled meeting in September. Its next monetary policy review is set for 28 October. This left a policy vacuum at a critical time. While Australia and Japan could rely on central bank actions as possible catalysts for currency support, New Zealand lacked such an anchor. The market priced the kiwi solely on external factors, which were overwhelmingly negative. As a result, USDNZD dropped nearly 5%, making it the worst performer among major currencies.

Furthermore, dairy is New Zealand's main export, and September weather forecasts posed a direct threat to future production. Fonterra, the world's largest dairy exporter, warned that El Niño could curb milk volume growth at the end of the 2026–2027 season, as the weather phenomenon increases the likelihood of extreme weather events.

October outlook

Elev8 broker identifies six key themes for traders in October:

1. Fed policy direction
2. BoJ rate expectations
3. Oil market volatility
4. Carry-trade position adjustments
5. U.S.-Mexico trade negotiations
6. Standard economic data releases

Traders should monitor the probability of the Fed delivering another 25-bps hike at its November meeting. Key data include US Non-farm payrolls (NFP) and the September Consumer Price Index (CPI), along with comments from Fed officials.

Overnight index swaps indicate a 42% probability of a BoJ rate increase to 1.50% in October and a 100% probability by December. Japanese inflation data, political statements on economic reflation, and intervention risk around 158.00 in USDJPY will be closely watched. Yen crosses such as EURJPY, AUDJPY, and GBPJPY may offer cleaner signals and smoother trading conditions.

Brent crude at $102 and the ongoing Strait of Hormuz disruption remain pivotal. Changes in the blockade, Houthi activity in Yemen, or statements on the duration of the conflict would affect oil prices and related currencies.

The carry unwind that weakened the peso by about 6.0% may persist if speculative shorts increase or equity volatility rises. With US Treasury yields above 5.0%, emerging market currencies like the South African rang (ZAR) and high-beta currencies such as AUD and NZD remain exposed and at risk of depreciation.

The postponed fourth round of US-Mexico trade talks resumes in October. Tariff signals could further weaken the peso, while a positive outcome could support a rebound given short positioning. The Bank of Mexico kept rates at 6.50% but removed language committing to that level.

Upcoming US employment data and inflation reports, along with Chinese economic data, will influence global risk sentiment and determine the next shift in global rate expectations.

October data and events calendar

Disclaimer: This article does not provide or constitute investment advice or recommendations, nor does it take into account your investment objectives, financial situation, or needs. Any actions taken based on this content are at your own discretion and risk—Elev8 accepts no liability for any resulting losses or consequences.