Global overview
The US dollar’s recent weakening phase now stretches to a week with the world’s most traded currency clearly producing a short-term top at 10-month highs. The USD’s near-term fate is likely to be driven by tonight’s Fed minutes and Thursday’s US inflation reading.
US dollar lower as Fed talk hits bond yields
The US dollar was weaker for a fifth day as bond yields extended a recent decline.
The US ten-year bond yield fell from 4.88% on Friday to 4.66% overnight – bond markets were closed on Monday for the Columbus Day holiday – in their biggest one-day fall since the Silicon Valley Bank crisis in March.
Last week, bond yields reversed from 16-year highs after Wednesday night’s weaker ADP jobs number, but commentary this week from the Federal Reserve has also pressured yields.
Most notably, vice chair Phillip Jefferson said on Monday the Fed would “proceed cautiously” with further rate hikes because rising bond yields had done some of the heavy lifting for the Fed by tightening financial conditions.
Kiwi outperforms
The AUD/USD also gained for a fifth consecutive day with the pair up 0.2% to one-week highs.
The NZD/USD extended its recent outperformance with the pair up 0.3% and finishing at the highest close since 9 August.
In Asia, the greenback was also weaker, with the USD/SGD down 0.1% as it neared three-week lows while the USD/CNH fell 0.1% to close at the lowest level since 15 September.
Fed minutes, PPI in focus ahead of Thursday’s CPI
Tonight’s major release will be the US Federal Reserve minutes after this week’s commentary from key board members hit bond yields and weighed on the US dollar.
Since this week’s Fed commentary, the chances for a hike at the central bank’s November meeting has fallen to 14% while the probability for a hike in December is currently sitting at 30% (source: Refintiv).
Additionally, FX markets will also be looking to tonight’s US producer prices ahead of Thursday night’s all-important consumer price index (CPI).
Kiwi moves to the top of the short-term range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 9 – 14 October
All times 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.
