Elev8, a global broker, continues its Traders Outlook article series. This issue focuses on the most significant currency changes in August and outlines the main events to watch for in September 2026.
What happened in August
The chart below shows how selected currencies performed in August 2026. Electric violet marks major currencies and the U.S. Dollar Index (DXY). All currencies’ performance is measured against their relevant benchmark USD exchange rate. For the Chinese renminbi the onshore rate (USDCNY) is used.
Source: Elev8 broker calculations
* USDCNY, onshore rate
** DXY (U.S. Dollar Index)
As you can see, the South African rand (ZAR) was the best-performing currency in August among the 22 currencies we track, while the Brazilian real (BRL) was the weakest. Among major currencies, the Japanese yen (JPY) lost the most value, while the Australian dollar (AUD) performed the best, rising by almost 2.0% over the course of 20 trading sessions. DXY fell slightly by 0.21%.
BRL and ZAR
Normally, one would expect emerging currencies to move in tandem, but this time, ZAR and BRL diverged sharply as a result of their differing fundamentals. Brazil faced fiscal strain and election uncertainty, while South Africa benefited from structural reforms, lower inflation, and strong commodity revenues.
Indeed, Brazil’s gross debt has risen more than 10 percentage points since President Lula da Silva took office, reaching 81.9% of GDP in June. Meanwhile, S&P and Fitch, the world’s primary rating agencies, upgraded South Africa’s credit rating due to the success of the Government-Business Partnership program. Domestic conditions also improved. South Africa recorded more than 400 consecutive days without loadshedding. Inflation fell to 4.3% thanks to lower fuel prices and very low food costs. Macro uncertainty eased after the extension of the African Growth and Opportunity Act through 2028. Furthermore, high gold and platinum prices lifted the resource sector and improved the trade balance.
AUD
Several factors supported the Aussie. Firstly, as Anthony Albanese, Australia’s Prime Minister, noted, the country’s triple-A credit rating and stable outlook had been reconfirmed. This stability sets the AUD apart from countries with weaker public finances. Secondly, rising commodity prices also helped. Iron ore futures rose for much of August as Chinese ports destocked. Copper traded near $14,285, and zinc reached four-year highs near $4,000.
Most importantly, however, investors now expect higher interest rates in Australia. Monthly inflation data in late August came in higher than expected, which increased the probability of a rate hike by the Reserve Bank of Australia (RBA) at the September meeting to over 50% from just around 16% before the release. Markets now fully price in a 25-basis point (bps) rate hike by year-end and leave some chance of another hike in early 2027.
JPY
The month opened with USDJPY trading near 155.20, a three-month low, after both the United States and Japan intervened in the currency market by purchasing yen at the end of July. However, the yen then lost those gains through August. USDJPY moved back through 157.00, 158.00, and 159.00. It then broke 160.00 on the last trading session of the month.
The primary reason for the continuing rally in USDJPY is painfully simple: a large interest rate gap between the U.S. and Japan still favours a higher USDJPY. Although the Bank of Japan (BOJ) raised its policy rate to 1.0% in June, a 31-year high, the Federal Reserve (Fed) policy rate remains much higher, and markets later reduced the chance that the gap would narrow soon.
Japan also faces fiscal pressures. Prime Minister Takaichi introduced a large spending program, which contradicts the BOJ’s efforts to control inflation. In fact, her spending plans have already pushed the yields on 10-year Japanese Government Bonds (JGB) to 2.945%. The 30-year yields reached 4.065%, and the 40-year yields hit 4.16%. Additionally, Takaichi plans to appoint two new BOJ board members after hawkish members Tamura and Takata leave in July 2027. Therefore, investors see a risk that the BOJ board becomes more dovish and believe that these appointments will weaken the commitment to tight monetary policy.
What to expect in September
The month of September poses significant risks to foreign exchange markets. Three major central banks (Fed, ECB, and BOJ) will all meet within a single eight-day window (16 – 18 September), and each may raise interest rates. Markets also face higher oil prices after military exchanges between the United States and Iran, a sell-off in global bonds, and uncertainty around U.S.–Canada trade negotiations. Below are the six themes that matter most.
1. European Central Bank (10 September)
The ECB will announce its rate decision already next week. It is widely expected to hike the rates. The July meeting minutes revealed that hawks were contemplating a rate hike at the July meeting and were willing to discuss the possibility of moving the deposit rate into restrictive territory beyond 2.50%. EURUSD is caught between ECB repricing, which supports the euro, and Fed repricing, which supports the dollar.
2. The Federal Reserve (16 September)
The Fed’s decision is the main driver for the dollar. After Chair Kevin Warsh spoke at Jackson Hole, markets raised the chance of a September hike. It will be very important to watch key data before the upcoming decision. Particularly, August payrolls will be published on 5 September. Market consensus is around 55,000–58,000. Wage growth is expected to slow to 2.9% from 3.2%. Also, the August Consumer Price Index (CPI) arrives on 11 September. A hot inflation print would further support a hike, pushing DXY higher. However, should the NFP come out weaker than expected, the Fed may be forced to hold rates, which could reverse the late-August dollar rally.
3. Bank of Japan (18 September)
The BOJ will announce its rate decision two days after the Fed. Markets price an 85–90% chance of a 25-bps rise to 1.25%. Two hikes are fully priced by January 2027, and a December hike stands near 60%. If the Fed also hikes that week, the rate gap barely narrows, and yen gains may stay limited. The 10-year JGB yield is near 3%, while the fiscal 2027 budget requests stand at a record 140 trillion yen. USDJPY at 160 remains a sensitive level for possible intervention.
4. Oil price
Oil prices rose after the U.S. and Iran exchanged fire on 31 August, with Brent approaching the $100 per barrel level. While high oil prices are good for the exporters like Canada and Norway, major importers like India, Thailand and Turkey may suffer. Furthermore, higher fuel costs also feed into consumer prices and support hawkish central banks, which, in turn, damage risk sentiment and may lead to a sell-off in assets like Bitcoin and equity indices, and exert downward pressure on risk-sensitive currencies like AUD and NZD.
5. Global debt
Global debt reached a record $353 trillion. The United States debt crossed $40 trillion in August. German long yields are at 15-year highs, while French yields hit an 18-year high. The dollar still offers a yield advantage, but fiscal concerns also weigh on the yen and the euro. Differences in sovereign risk may drive more divergence inside the Eurozone, which could provoke a financial crisis.
6. Trade
Trade policy adds another risk. The U.S. imposed a 50% Section 338 tariff on $20 billion of Canadian goods, including alcohol, lumber, dairy and textiles. Canada has announced retaliatory tariffs. The standoff has not been resolved yet, and may still escalate, making all CAD pairs highly unstable.
Conclusion
Overall, we, at Elev8 broker, see September as carrying an unprecedented level of risk for FX traders. Triple central bank hike (Fed, ECB, and BOJ) within a single eight-day window, against a backdrop of a hot war in the Strait of Hormuz and a synchronised global bond selloff. Positioning, data surprises and geopolitical escalation will create extreme volatility—the week of 15–18 September in particular is likely to be the most event-dense period for FX markets this year.
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