The dollar index traded around 102.5 on Wednesday, hovering near seven-week highs as investors awaited minutes of the Federal Reserve’s last meeting to gain fresh insights on the monetary policy path. Markets also look forward to the September Consumer Price Index report on Thursday that could influence the trajectory of Fed rate cuts. Last week, a stronger-than-expected US jobs report prompted traders to price out any chances of another jumbo 50 basis point rate cut in November. Markets now see about an 85% probability of a more modest 25 bps reduction and 15% odds of no change in policy. The greenback held steady against most major currencies, but strengthened further on the kiwi after the Reserve Bank of New Zealand lowered its cash rate by 50 bps, cutting rates for the second straight meeting amid easing inflation and subdued economic activity.

Dollar Holds Gains Ahead of Fed Minutes

The New Zealand dollar depreciated to $0.61 on Wednesday, trading at its lowest levels in seven weeks after the Reserve Bank of New Zealand lowered interest rates by half a percentage point, as widely expected. This marked the second consecutive reduction, bringing the official cash rate to 4.75% from 5.25%. The move followed a 25-basis-point cut during the central bank's previous meeting in August. The central bank expressed confidence that next week’s consumer inflation data would show annual inflation not just within the 1-3% target range but almost at the 2% midpoint. Meanwhile, investors now await the FOMC minutes, due later in the day, which could provide crucial insights into the Federal Reserve's future monetary policy direction.

Kiwi Slips After RBNZ Delivers Jumbo Rate Cut

The Mexican peso weakened toward 19.4 per USD, retreating from a two-week high of 19.27 reached on October 4, following risk-off sentiment after disappointing stimulus news from China, which weighed on emerging market currencies. Additionally, the US dollar strengthened amid expectations of a less dovish Federal Reserve and safe-haven demand, putting additional pressure on the peso. While the peso is retreating from an upward trend, further depreciation may be mitigated by growing investor confidence in the new administration of President Claudia Sheinbaum, perceived as more investment-friendly compared to her predecessor. Despite initial concerns that Sheinbaum would continue her mentor's controversial policies, recent political developments, including a focus on strengthening the automotive industry and revamping judicial reforms, have begun to reassure markets.

Mexican Peso Weakens for 2nd Session

The Canadian dollar weakened toward 1.37 per USD in October, reaching an eight-week low as the foreign currency inflow outlook dampened, while the US dollar strengthened. Canada's trade deficit widened to CAD 1.10 billion in August from a revised CAD 0.29 billion in July, exceeding expectations of CAD 0.5 billion. This marks the largest gap since May, driven by a 1.0% decline in exports and a 3.0% drop in energy shipments, particularly crude oil, Canada's top export, which fell 4.1%. Pressure on the energy commodity increased as prices plunged amid the lack of stronger stimulus from the world’s top importer China. Meanwhile, the upcoming labor data is expected to show further weakness in the labor market, increasing bets of further monetary policy easing by the Bank of Canada. Elsewhere, the US dollar strengthened on expectations of a less dovish Federal Reserve and safe-haven demand, pressuring the loonie further.

Canadian Dollar Weakens to 8-Week Low

USDCAD increased to a 7-week high of 1.36. Over the past 4 weeks, US Dollar Canadian Dollar gained 0.59%, and in the last 12 months, it increased 0.4%.

Canadian Dollar Hits 7-week Low

The offshore yuan held its decline at around 7.06 per dollar, following a briefing from the National Development and Reform Commission that indicated no immediate additional stimulus measures, thereby somewhat disappointing the market. However, during a press conference today, Zheng Shanjie, Chairman of the NDRC, announced a plan to issue special purpose bonds designed to stimulate local government growth. He revealed that ultra-long special sovereign bonds totaling CNY 1 trillion have already been allocated for regional projects. At the same time, the central government is expected to roll out a CNY 100 billion investment plan for the upcoming year by the end of this month, ahead of previous timelines. This comes in the wake of a series of stimulus measures introduced by Chinese authorities in late September, including interest rate cuts, lowered cash reserve requirements for banks, relaxed property purchase restrictions, and increased liquidity for the stock markets.

Offshore Yuan Holds Decline After NDRC Briefing

The Japanese yen stabilized around 147.7 per dollar on Tuesday after sliding to a seven-week low in the previous session, as investors continued to assess the outlook for Bank of Japan monetary policy. The central bank said in its latest quarterly report that a rise in prices and wages was spreading across Japan, but acknowledged the concern of small and medium-sized enterprises on declining margins. Meanwhile, data showed that Japan’s real wages declined 0.6% in August after two months of increases, while household spending fell 1.9%. The yen came under pressure recently when new Prime Minister Shigeru Ishiba and his economy minister Ryosei Akazawa advocated for caution before raising rates further given current economic conditions. The currency’s decline was fueled further by a stronger-than-expected US jobs report on Friday that prompted markets to price out any chances of another 50 basis point rate cut from the Federal Reserve in November.

Yen Stabilizes as Traders Assess BOJ Outlook

The offshore yuan fell toward 7.08 per dollar, reversing an earlier rise, as traders returned from a week-long holiday. Before the break, Chinese authorities rolled out a series of stimulus measures, including interest rate cuts, lower cash reserve requirements for banks, eased property purchase restrictions, and enhanced liquidity for stock markets. As traders return, attention shifts to today's National Development and Reform Commission briefing, with a keen focus on possible additional policy measures and its implementations, as Beijing underscores its efforts to revitalize the economy and achieve its growth target of around 5%. Traders are also eagerly awaiting China's upcoming inflation and trade data this week, which are expected to offer deeper insights into the health of the world’s second-largest economy.

Offshore Yuan Falls After Long Holiday

The Australian dollar depreciated past $0.675 on Tuesday, hitting a three-week low as investors reacted to the latest Reserve Bank of Australia policy meeting minutes. The minutes revealed that board members discussed scenarios for both lowering and raising interest rates in the future amid considerable uncertainty about the economic outlook. Still, the central bank concluded that the current level of the cash rate best balanced risks to inflation and the labor market. Meanwhile, a private survey showed that consumer confidence in Australia improved significantly in October on hopes that interest rates will not rise further, while business sentiment edged higher in September. Externally, the Aussie came under pressure from the greenback’s strength as solid US economic data tempered expectations for Federal Reserve rate cuts.

Australian Dollar Falls After RBA Minutes

The New Zealand dollar held around $0.612 on Tuesday, remaining close to its lowest level in nearly four weeks. Investors are bracing for the Reserve Bank of New Zealand’s policy meeting on Wednesday, where the central bank is widely expected to deliver a 50-basis-point cut, reducing its rate to 4.75%. In August, the RBNZ lowered rates by 25 basis points to 5.25%, nearly a year earlier than the central bank’s own forecast, taking some market players by surprise and prompting bets of an aggressive easing path through the end of 2025. Additionally, ongoing geopolitical tensions in the Middle East continued to weigh on risk-sensitive currencies. Meanwhile, a strong US jobs report last week dashed hopes of large rate cuts from the Federal Reserve in the coming months.

NZ Dollar Holds Decline Ahead of RBNZ Expected Rate Cut

The dollar index steadied around 102.4 on Tuesday, trading close to its highest levels since mid-August as investors recalibrated expectations for Federal Reserve interest rate cuts following a stronger-than-expected September jobs report. Markets now see around an 87% probability that the Fed will opt for a more modest 25 basis point rate reduction in November, while pricing out any chances of another half-percentage point cut, according to CME’s FedWatch Tool. The dollar also tracked strength in US Treasury yields, with the benchmark 10-year US bond yields rising above 4% for the first time since early August. Investors now look ahead to the latest Fed meeting minutes on Wednesday and the consumer price index report on Thursday to guide the rates outlook further. Elsewhere, heightened tensions in the Middle East continued to boost safe-haven demand for the dollar.

Dollar Holds Steady as Rates Outlook Mulled

The Indian rupee was at the 84 per USD level, hovering close to the record low of 83.05 touched on October 4th, pressured by an upturn in foreign currency outflows from Indian financial centers. The announcement of aggressive fiscal and monetary and stimulus from China drove domestic and foreign investors to reallocate their capital towards Chinese markets, selling their rupee-denominated positions and contributing to the historical rallies in Shanghai and Hong Kong equity indices. The foreign currency outflows were magnified by the surge in oil and coal prices during early October after heightened geopolitical tensions in the Middle East increased the risk premiums for energy contracts and made key Indian imports more expensive. Still, the RBI is expected to prolong its terminal rate of 6.5% this week and hold off the start of rate cuts, heeding to upside inflation risks despite the recent slowdown in domestic price growth.

Indian Rupee Hovers Close to Record Low

The British pound fell below $1.311, the lowest in nearly four weeks on expectations of more aggressive rate cuts in November. Bank of England Governor Andrew Bailey signaled a shift toward a more "activist" and "aggressive" approach to cutting rates, though BoE Chief Economist Huw Pill urged a more cautious path. Meanwhile, the UK construction sector grew at its fastest pace in over two years, but concerns linger about potential spending cuts and tax hikes in the upcoming October 30 budget. Additionally, a strong US jobs report tempered expectations of a large Fed rate cut.

Sterling Falls Toward 4-Week Low

The South Korean won continued its recent decline toward 1,350 per dollar, hovering near its lowest levels in over seven weeks amid ongoing dollar strength following robust US labor market data. The stronger-than-expected US jobs data eased labor market concerns and reduced the urgency for further significant US rate cuts. This amplified the impact of the dovish outlook from the Bank of Korea, as slowing price growth reinforced expectations that the central bank will cut its policy rate this week for the first time in over four years. Consumer inflation slowed to 1.6% in September, the lowest rate since early 2021, and well below the market consensus of 1.9%. Meanwhile, the latest data showed that South Korea's foreign reserves grew to $420 billion by the end of September, ranking ninth globally, with $373.3 billion in securities and $22.3 billion in deposits.

South Korean Won Hovers Near 7-Week Lows

The offshore yuan stabilized at around 7.09 per dollar after falling to a more-than-one-week low last week, as China's National Day holiday neared its end. The yuan's weakness last week was primarily driven by a rallying US dollar, buoyed by a stronger-than-expected US jobs report, which led traders to dismiss the likelihood of a 50bps rate cut by the Fed in November. In China, official data from last week indicated a slight improvement in September's manufacturing activity, beating expectations, after August’s six-month low. However, the services sector saw its weakest performance since January 2023, missing forecasts. A private survey further underscored concerns, revealing the steepest contraction in manufacturing since January 2023 and a marked slowdown in services, which hit their lowest level since September 2023. Traders are now looking ahead to China's upcoming inflation data and trade figures in the coming days to assess the health of the world's second-largest economy.

Offshore Yuan Stabilizes as Long Holiday Nears Its End

The Australian dollar traded around $0.68 on Monday after losing 1.6% last week, weighed down by the greenback’s strength as solid US economic data tempered expectations for Federal Reserve interest rate cuts. Data on Friday showed that the US economy added significantly more jobs than expected in September, prompting markets to price out any chances of another 50 basis point rate cut from the Fed in November. Heightened tensions in the Middle East also dampened risk appetite, pressuring risk-sensitive currencies further. Meanwhile, investors continued to assess the outlook for Reserve Bank of Australia monetary policy amid expectations that it could start cutting rates much later than its peers. Markets are currently assigning an over 70% chance for an RBA rate cut in December, but it will likely hold policy steady until early 2025 if core inflation stays high.

Aussie Holds Decline on Strong US Jobs Data

The Japanese yen weakened past 149 per dollar on Monday before recouping some losses, prompting top currency diplomat Atsushi Mimura to issue a fresh verbal warning against speculative moves in the foreign exchange market. The yen came under pressure last week when new Prime Minister Shigeru Ishiba and his economy minister Ryosei Akazawa advocated for caution before raising interest rates further given current economic conditions. The currency’s decline was fueled further by a stronger-than-expected US jobs report on Friday that prompted markets to price out any chances of another 50 basis point rate cut from the Federal Reserve in November. Investors now look ahead to Japanese wage data this week to gauge its implications on inflationary pressures and monetary policy.

Yen Weakness Prompts Fresh Verbal Warning

The New Zealand dollar held around $0.616 ahead of the Reserve Bank of New Zealand’s policy meeting later this week, where it is expected to announce its second interest rate cut this year. Back in August, the RBNZ surprised markets after it slashed its cash rates by 25 basis points to 5.25%, nearly a year earlier than the central bank’s forecast. Investors are now fully pricing in a 50-basis-point reduction. Externally, the Kiwi remains under pressure due to the strength of the US dollar, buoyed by stronger-than-expected US payroll data that tempered expectations of another large rate cut by the Federal Reserve. Additionally, rising geopolitical tensions in the Middle East weighed on investor sentiment.

NZ Dollar Holds Decline Ahead of RBNZ Meeting

The dollar index held around 102.5 on Monday after surging half a percent in the previous session following a stronger-than-expected US jobs report that prompted markets to price out any chances of another 50 basis point rate cut from the Federal Reserve in November. Data on Friday showed that nonfarm payrolls rose by 254,000 in September, surpassing expectations of 140,000, while the unemployment rate fell to 4.1% from 4.2%. Markets now see around a 95% chance of a more modest 25 bps rate cut in November and about a 5% odds of no change in the policy rate, according to CME’s FedWatch Tool. Investors now look ahead to the latest Fed meeting minutes on Wednesday and the consumer price index report on Thursday to guide the rates outlook further. The dollar also benefited from increased safe-haven inflows amid heightened tensions in the Middle East.

Dollar Holds Gains on Strong Jobs Report

The South Korean won extended its decline past 1,350 per dollar, its weakest in nearly two months, tracking the decline in other Asian currencies as strong labor market data from the US magnified the impact of a dovish BoK. The US jobs report pointed to a sharper-than-expected hiring growth in the country, erasing concerns of labor market weakness and limiting the magnitude of rate cuts expected by the Federal Reserve. Conversely, slowing price growth domestically backed bets that the Bank of Korea is due to lower its policy rate from the terminal level of 3.5% next week, its first rate cut in over four years. Consumer inflation slowed to 1.6% in September, the lowest since early 2021, and well below the market consensus of 1.9%. In the meantime, the weakening of the Chinese yuan since Beijing’s stimulus delivered broad pressure on other Asian currencies.

South Korean Yuan Weakens to 2-Month Low

The Australian dollar fell almost 1% to $0.68 on Friday and was on track to lose nearly 1.5% for the week, weighed down by the greenback’s strength as solid US economic data tempered expectations for Federal Reserve interest rate cuts. Nonfarm payrolls rose by 254,000 in September, surpassing expectations, while the previous two months saw an upward revision of 72,000 jobs. Meanwhile, escalating tensions in the Middle East also continued to grip markets and dampen risk appetite. Locally, investors continued to assess the outlook for Reserve Bank of Australia monetary policy amid expectations that it could start cutting interest rates much later than its peers. Markets are currently assigning an over 70% chance for an RBA rate cut in December, but it will likely hold policy steady until early 2025 if core inflation stays high.

Aussie Depreciates Further After NFPs

The Mexican peso strengthened past 19.2 per USD in October, reaching a two-week high, driven by expectations of continued restrictive monetary policy and easing concerns over judicial reforms. Comments from Bank of Mexico Deputy Governor Jonathan Heath, advocating for sustained high interest rates, boosted foreign capital inflow prospects. The peso gained further after the Supreme Court's 8-3 vote to re-examine controversial judicial reforms proposing the election rather than appointment of judges, alleviating some concerns about judicial independence. However, the review underscores lingering risks to Mexican assets, as critics warn the reforms could weaken institutional quality and economic stability. Although Mexico retains its investment-grade rating, potential judicial changes could jeopardize this status if institutional deterioration occurs. Meanwhile, Mexico's unemployment rate reached 3% in August, its highest in a year, though still below the long-term average.

Mexican Peso Reaches 2-Week High

The Euro fell below $1.098, its weakest level since mid-August, due to diverging monetary policies between the European Central Bank  and the US Federal Reserve. Weak Eurozone growth and inflation, which dropped below the ECB’s 2% target in September raised expectations of a rate cut at the ECB’s October meeting, potentially marking its third cut this year. ECB leaders, including Christine Lagarde, have signaled support for this. On the other hand, a strong US jobs report reduced the likelihood of a large rate cut by the Federal Reserve, strengthening the dollar and weakening the Euro further.

Euro Weakens Further after US Data

The British pound fell below $1.31, marking its lowest in three weeks and a 2% weekly drop, the steepest in over a year, after Bank of England Governor Andrew Bailey suggested the possibility of more aggressive rate cuts in November. Bailey signaled a shift toward a more "activist" and "aggressive" approach to cutting rates, though BoE Chief Economist Huw Pill urged a more cautious path. Additionally, the UK construction sector grew at its fastest pace in over two years, but concerns linger about potential spending cuts and tax hikes in the upcoming October 30 budget. Additionally, a strong US jobs report tempered expectations of a large Fed rate cut and lifted the dollar.

Sterling Set for 2% Weekly Decline

USDKRW increased to a 6-week high of 1349.00. Over the past 4 weeks, US Dollar South Korean Won gained 1.1%, and in the last 12 months, it increased 0.17%.

South Korean Won Hits 6-week Low

The dollar index surged 0.5% to 102.43 on Friday, its highest level since mid-August, following a stronger-than-expected US jobs report that reduced the likelihood of a large interest-rate cut by the Federal Reserve next month. Nonfarm payrolls rose by 254,000 in September, surpassing expectations, while the previous two months saw an upward revision of 72,000 jobs. The unemployment rate dropped to 4.1%, below expectations of 4.2%. The dollar has gained nearly 2% this week, buoyed by safe-haven demand amid escalating tensions in the Middle East.

DXY Soars after Jobs Report

EURUSD decreased to a 7-week low of 1.10. Over the past 4 weeks, Euro US Dollar lost 0.72%, and in the last 12 months, it increased 4.58%.

Euro Hits 7-week Low

The Australian dollar steadied around $0.685 on Friday but was still on track to lose nearly 1% for the week, weighed down by the greenback’s strength as solid US economic data tempered expectations for Federal Reserve interest rate cuts. Escalating tensions in the Middle East after US President Biden suggested that Israel could target Iranian oil facilities in retaliation for a recent missile attack also continued to grip markets and dampen risk appetite. Meanwhile, investors continued to assess the outlook for Reserve Bank of Australia monetary policy amid expectations that it could start cutting interest rates much later than its peers. Markets are currently assigning an over 70% chance for an RBA rate cut in December, but it will likely hold policy steady until early 2025 if core inflation stays high.

Australian Dollar Poised for Weekly Loss

The New Zealand dollar traded around $0.621, remaining close to its lowest in two weeks as traders anticipated a significant interest rate cut from the Reserve Bank of New Zealand amid concerns over the country’s economic growth outlook. The RBNZ began its monetary easing cycle in August with a 25-basis point rate cut, and is widely expected to implement further reductions. Markets are now fully pricing in a half-point rate cut at the central bank’s meeting next week. Adding to the pressure on the Kiwi is the strength of the US dollar, which benefited from safe-haven demand due to rising tensions in the Middle East. Investors are now turning their attention to US non-farm payrolls report later in the day, for clues on the Federal Reserve’s next policy move.

New Zealand Dollar Hovers at 2-Week Low

The Japanese yen stabilized around 146.5 per dollar on Friday, but was still set to decline over 3% this week as top Japanese officials tempered expectations on additional interest rate hikes. Earlier this week, newly installed Prime Minister Shigeru Ishiba said that it was too soon for further rate hikes given current economic conditions. His economy minister Ryosei Akazawa also called on the central bank to be cautious about raising rates again. Moreover, Ishiba’s finance minister Katsunobu Kato is being tasked to put forward measures targeting price relief, economic growth and assistance for low income households. Externally, the yen came under pressure from a rallying dollar as strong US economic data supported the view that the Federal Reserve does not need to cut rates aggressively moving forward.

Japanese Yen Set for Sharp Weekly Fall

The dollar index steadied around 101.9 on Friday after rising for four straight sessions as investors geared up for the September jobs report to gain more insights on the labor market. Traders expect no significant market movements from the employment data unless it comes in way below forecasts. On Thursday, the index climbed to an over six-week high amid solid US economic data and increased safe-haven demand due to escalating Middle East Tensions. ISM data showed that US services activity expanded at the fastest pace in over a year during September, while the latest job openings, private employment and weekly jobless claims numbers pointed to a still resilient labor market. Meanwhile, US President Biden suggested that Israel could target Iranian oil facilities in retaliation for a recent missile attack, sending oil prices higher and spurring demand for safer assets. The dollar also benefited from dovish signals in the UK, Europe and Japan.

Dollar Holds Steady Ahead of Payrolls Data

The Brazilian real weakened past 5.48 per USD in October, a one-week low, amid risk aversion from geopolitical tension and concerns of lower foreign exchange inflows. Investors sought safer currencies amid concerns that Israel’s retaliation to Iran’s attack may stoke more aggressive warefare. In the meantime, lingering doubts over the impact of Chinese stimulus drove the real to pare back some earlier support from higher Chinese demand for Brazilian commodity exports. However, easing domestic fiscal concerns and positive economic indicators limited the Brazilian currency’s decline. Brazil’s composite PMI rose to 55.2 in September 2024, up from an eight-month low of 52.9 in August, indicating stronger private sector growth. Furthermore, Moody’s upgraded Brazil’s credit rating to Ba1, nearing investment-grade status, bolstered by improved fiscal management and a favorable economic outlook.

Brazilian Real Weakens to 1-Week Low

The Euro dropped to $1.102, a three-week low, as weak Eurozone growth and inflation falling below the ECB’s 2% target raised expectations of a rate cut. Annual inflation in the Eurozone dropped to 1.8% in September, its lowest since April 2021 and below forecasts of 1.9%. Core inflation also eased to 2.7%, down from 2.8%, defying expectations of it remaining steady. The softer inflation print bolstered market expectations for another rate cut at the ECB’s October meeting, which would mark the central bank's third reduction this year. Markets reflect a 95% probability of a 25 bps rate cut this month. ECB leaders, including Christine Lagarde, have signaled support for this outlook. Isabel Schnabel, typically hawkish, suggested inflation could soon hit the 2% target, boosting rate cut bets. Meanwhile, strong US services sector data added pressure on the Euro.

Euro Drops to 3-Week Low

The Russian ruble weakened to around 95 per USD, trading near fresh 12-month lows, as a stronger dollar was supported by robust US economic data. Consequently, the probability of a 50 basis point rate cut by the Federal Reserve in November decreased from 35% to 32%. Meanwhile, the Bank of Russia raised its key interest rate by 100 basis points to 19% during its September meeting, signaling a potential for another hike in October. Policymakers also adjusted their inflation forecast for Russia to 6.5%-7% for the year, up from previous estimates, with inflation currently at 9.1%.  The spike in inflation is largely attributed to the economic strain from increased government military spending, which has driven up wages and outpaced the economy’s capacity to supply goods and services.

Russian Ruble Near 12-Month Lows

The Turkish lira topped 34 per USD in late September, hovering close to record low levels, as traders continue to assess the economic and monetary outlook for the country. Inflation in Turkey eased to 49.4% in September from 51.9% in August, but came above forecasts of 48.3% and remains elevated. Also, the monthly rate edged up to 2.97% from 2.47%. Nonetheless, annual inflation fell below the central bank’s 50% interest rate, the first time in three years that real interest rates are above zero. The central bank Governor Fatih Karahan recently said that policymakers will continue to preserve a tight monetary policy and that monthly inflation needs to slow permanently and significantly. In its September meeting, the central bank maintained its key interest rate at 50% for the sixth straight session, reinforcing its commitment to curbing inflation. Some analysts are now expecting the central bank to start lowering interest rates in 2025 only

Turkish Lira Near Record Low

The Canadian dollar weakened past 1.35 per USD in October, reaching a one-week low as downbeat economic data heightened expectations for further monetary easing, while the US dollar strenghtened. The S&P Global Canada Composite PMI fell to 47.0 in September from 47.8 in August, signaling a deepening contraction in private sector activity for the fourth consecutive month. Meanwhile, the Services PMI dropped sharply to 46.4, its steepest decline since March, highlighting a sustained downturn in the services sector. Additionally, the US dollar surged to six-week highs, bolstered by strong economic data and safe-haven demand as investors turned risk-averse due to the escalating Middle Eastern conflict, further weighing on the loonie.

Canadian Dollar Falls to 1-Week Low

The dollar index rose above 101.9 on Thursday, marking its fourth consecutive gain and reaching a six-week high. This followed a stronger-than-expected ISM Services PMI, showing the fastest US services sector growth since February 2023, easing economic concerns. Initial jobless claims were slightly higher than forecast, while job cuts in September remained stable. JOLTS job openings and ADP employment numbers also exceeded expectations. The likelihood of a 50bps Fed rate cut in November fell to 32% from 35%. The dollar hit a one-month high against the yen and strengthened against the euro following dovish ECB comments.

DXY Up to 6-Week High

The Swiss Franc weakened slightly to around 0.85 per USD after Swiss inflation eased to 0.8%, falling short of market expectations of 1.1%. The softer CPI data bolstered expectations for dovish policymakers pushing for a 50 basis point rate cut by the Swiss National Bank (SNB) in the upcoming December meeting. Previously, the SNB had already reduced the key interest rate by 25 basis points for the third consecutive time. At the same time, the US dollar has been gaining strength, reaching a new three-week high, as robust US private employment data supported the view that the Federal Reserve may not need to implement aggressive rate cuts.

Swiss Franc Weakens Slightly after CPI Print

The British pound weakened to $1.31, moving away from March 2022-highs touched in late September, after comments from the Bank of England Governor raised bets the central bank will deliver another rate cut in November. Andrew Bailey said in an interview with the Guardian that the bank could move more quickly to cut interest rates if there is further good news on inflation. Markets are now pricing in a 25bps rate cut next month and a 40% chance of a similar reduction in December. The Bank of England left interest rates steady at 5% in September, after a quarter-point cut in August. The pound is benefiting from a general dollar weakness with traders predicting a faster monetary easing by the Federal Reserve compared to other major central banks, including the BoE. During September, the sterling appreciated by 1.9%.

Pound Depreciates After Comments from BoE Governor

DXY increased to a 4-week high of 101.84. Over the past 4 weeks, Dollar Index gained 0.56%, and in the last 12 months, it decreased 4.66%.

Dollar Index Hits 4-week High

The South Korean won depreciated again to around 1,330 per dollar, hitting a one-week low as the dollar strengthened due to robust US labor market data and safe-haven demand amid rising tensions in the Middle East. The recent stronger-than-expected US jobs data for the private sector eased labor market concerns and reduced the urgency for further significant US rate cuts. Domestically, investors digested earlier data showing that South Korea's inflation hit a three-and-a-half-year low in September, while the S&P PMI indicated a renewed and substantial contraction in the country's manufacturing sector, providing room for potential rate cuts by the Bank of Korea. Investors now eagerly await next week’s rate decision as BOK Governor Rhee Chang-yong assessed recent measures on household debt before considering a cut. Meanwhile, authorities pledged to stabilize markets amid rising risk-averse sentiment from the Middle East crisis and will monitor its impact on the domestic economy.

South Korean Won Pulls Back on Dollar Strength

The Australian dollar fell toward $0.685 on Thursday, retreating further from 19-month highs as the greenback strengthened on better-than-expected US private employment data which countered dovish bets on Federal Reserve monetary policy. Escalating tensions in the Middle East after Iran’s missile attack on Israel also continued to grip markets and dampen risk appetite. Still, the Aussie remains supported by expectations that the Reserve Bank of Australia will start cutting interest rates much later than its peers. Markets are currently assigning a 72% chance for an RBA rate cut in December, but it will likely hold policy steady until early 2025 if core inflation stays high. On the data front, a final reading showed that Australian business activity turned contractionary in September as deteriorating manufacturing conditions outweighed services sector expansion.

Australian Dollar Slides on Greenback Strength

The New Zealand dollar fell to around $0.623 on Thursday, extending its decline for a third straight session, amid growing expectations of a more aggressive rate cut from the Reserve Bank of New Zealand next week. Markets are now fully pricing in a 50-basis-point reduction from the current 5.25% cash rate at the central bank's upcoming meeting. Externally, the Kiwi faced additional pressure from a firm US dollar, supported by a stronger-than-expected US ADP employment report and rising tensions in the Middle East. US private sector hiring picked up in September, signalling the labor market remained resilient despite some signs of weakness. Meanwhile, markets are closely watching geopolitical developments following Iran’s missile attack on Israel.

New Zealand Dollar Extends Losses

The Japanese yen depreciated to around 147 per dollar on Thursday, hitting a one-month low as new Prime Minister Shigeru Ishiba said that it was too soon for additional rate hikes after meeting with Bank of Japan Governor Kazuo Ueda. He said that current economic conditions do not require further rate increases, prompting markets to push back forecasts for the next BOJ hike. Newly appointed economy minister voiced the same sentiment, calling on the central bank to be cautious about raising rates again. On the data front, a final reading showed that business activity in Japan remained expansionary for the eighth consecutive month in September amid robust demand. The yen also weakened on the dollar as stronger-than-expected US private employment data supported the view that the Federal Reserve does not need to cut interest rates aggressively.

Japanese Yen Falls to 1-Month Low

The dollar index climbed above 101.7 on Thursday, rising for the fourth straight session to the highest in three weeks, as strong US private employment data supported the view that the Federal Reserve does not need to cut interest rates aggressively. An ADP report showed that 143,000 jobs were added to the private sector in September, well above forecasts of 120,000, indicating that the labor market remains resilient. Investors now look ahead to the latest weekly jobless claims on Thursday and the September jobs report on Friday to gain more clarity on the rates path. Markets now see a 65% chance that the Fed will opt for a more modest 25 basis point rate cut in November, up from 43% a week ago. The dollar hit a one-month high on the yen after Japan’s incoming Prime Minister said it was too soon for additional rate hikes. The greenback also strengthened sharply against the euro amid dovish remarks from a European Central Bank official.

Dollar Extends Gains on Solid Jobs Data

USDJPY increased to a 4-week high of 146.50. Over the past 4 weeks, US Dollar Japanese Yen gained 0.77%, and in the last 12 months, it decreased 1.7%.

Japanese Yen Hits 4-week Low

The Mexican peso strengthened past 19.4 per USD, rebounding from a two-week low of 19.69 on September 27th, following President Claudia Sheinbaum’s inauguration speech and hawkish comments from Banxico’s Deputy Governor. Investor sentiment improved as Sheinbaum reassured markets about the security of foreign investments, signaling policy continuity. Meanwhile, Jonathan Heath, Deputy Governor of Banxico, stated that while core inflation is roughly aligned with the monetary authority’s target, persistent services inflation necessitates a pause in the current easing cycle. However, economic pressures continue to build. Banxico is facing increased calls to lower borrowing costs as both business confidence and manufacturing activity hit multi-year lows. Manufacturing business confidence fell by 1.1 points to 51.9 in September, its lowest level since January 2023, while the manufacturing PMI dropped to 47.3, the weakest reading since January 2022.

Mexican Peso Strengthens Past 19.4 USD

The Brazilian real strengthened to 5.42 per USD, reaching a six-week high amid easing domestic fiscal concerns and favorable economic data. Moody's recently upgraded Brazil's credit rating to Ba1, edging the country closer to investment-grade status. This reflects improvements in Brazil's fiscal management and economic outlook, signaling greater confidence from international credit agencies. The Brazilian government's recent budget freeze of R$3.67 billion from the Growth Acceleration Program and R$974.8 million from committee amendments further underscored a cautious fiscal approach. Additionally, a reduced deficit estimate for 2024 helped alleviate market concerns. Meanwhile, Brazil's manufacturing PMI rose to 53.2 in September from 50.4 in August, signaling a strong recovery in factory activity and marking nine consecutive months of expansion, reinforcing the central bank's hawkish stance.

Brazilian Real Strengthens to 6-Week High

The dollar index rose to over 101.4 on Wednesday, extending its earlier gains amid stronger-than-expected labor market data and demand for the greenback’s safety on escalated geopolitical concerns. A report from the ADP suggested that over 140,000 jobs were added to the US private sector in September. This added to evidence that the US labor market may refrain from softening at the marked pace that brought concern to Fed policymakers and drove the central bank to deliver an aggressive 50bps cut last month, paring expectations on the magnitude of the current cutting cycle. Additionally, dollar demand remained supported by concerns of escalated warfare in the Middle East after Iran attacked Israel with ballistic missiles overnight, driving Israeli authorities to pledge a response.

US Dollar Index Rises Further

The Japanese yen slipped to around 144 per dollar on Wednesday amid lingering uncertainty on the path for Bank of Japan interest rate hikes. Japan’s newly appointed Economy Minister said that the central bank should be careful about raising rates again as it takes time to completely exit deflation. He added that incoming Prime Minister Shigeru Ishiba is not necessarily in favor of hiking rates further without some conditions being met first. Ishiba pledged on Tuesday to support households amid rising prices and a sluggish economy. Meanwhile, investors will assess consumer confidence data for September later in the session for more insights on the economy. The yen also weakened even as an escalating conflict in the Middle East prompted investors to rush for safe-haven assets.

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