Dollar climbs to 18-month high as yields surge
US 10-year yields hit 5.34%, the highest since 2002, before falling about 10bp from the peak. Fed officials continued to highlight inflation risks, while also signalling no immediate rush to raise rates again.
Markets cut the chance of an October hike to around 27% from nearly 70% five days earlier. The 30-year yield briefly touched 5.68% before easing, while officials highlighted AI investment and higher energy costs as potential sources of inflation pressure.
Data was mixed. ISM manufacturing slipped to 54.5 (consensus 55.0), but prices paid jumped 6.8 points to 77.9, the highest since May. Initial jobless claims fell to 197k, while continuing claims dropped to 1.701mn, the lowest since March 2023. The S&P 500 pared losses to close up 0.2% and the Nasdaq gained 0.05%. WTI rose about 3% on reports Washington is weighing 10,000 more troops and a third carrier for the Middle East.
GBP slid to its lowest since June as 10-year gilts touched 5.50%, the highest since 2007, and 30-year yields topped 6% for the first time in nearly three decades. The FTSE 100 fell 1.7%. A BoE member argued a hike is needed to protect credibility. Gilts and Bunds recovered into the close as diesel prices eased on reports of emergency stock releases.
Closer to home, the ASX 200 dropped 2% with energy down 3.1%. Australia’s August goods trade surplus narrowed to A$0.5bn against a A$2.0bn consensus, and manufacturing PMI fell to 49.6 from 52.0. In Japan, the Tankan large manufacturers index rose to 24, an eight-year high, while the BoJ’s summary showed rising concern over inflation overshooting, with some members open to faster hikes.
In FX, AUD/USD was down 0.2%, while NZD/USD was down 0.5%.
In Asia, USD/SGD was up 0.3% and USD/CNH was little changed.
China fuel exports pause as USD/CNH stays near recent low
Chinese refiners reportedly suspended fuel exports beyond Hong Kong and Macau, adding to concerns over global fuel supplies and lifting oil prices. Brent is above $100 a barrel, while WTI rose above $93.
Separately, USD/CNH remains just 0.4% above its 21 September low of 6.6912. The pair would need to rise above the 50-day average at 6.7277 to improve its near-term outlook, with the 100-day average at 6.7596 the next level to watch.
Inflation worries keep USD/SGD on watch
USD/SGD remains about 1.7% above its 28 January low of 1.2586 as Fed officials continue to emphasise inflation risks. Jeff Schmid and Tom Barkin highlighted persistent price pressures, while Susan Collins warned that higher energy costs could add to inflation through transport and heating.
For USD/SGD, the 100-day average at 1.2789 provides the first area of support, followed by the 50-day average at 1.2770. A move higher would put 1.2850 back in focus.
USD index above 102 handle
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Calendar: 28 September to 3 October
All times are in AEST
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
