Greenback back at 18-month highs
The US dollar returned to 18-month highs overnight as a sell-off in US sharemarkets drove investors back towards safe-haven assets.
The Dow Jones fell 0.7%, while the tech-focused Nasdaq outperformed and lost just 0.2%.
The greenback was also supported by renewed geopolitical concerns after Iranian attacks on ships in the Strait of Hormuz pushed oil prices higher. The closely watched Federal Reserve meeting minutes provided little new information.
The euro was the hardest-hit major currency as ongoing political concerns surrounding the French budget triggered a sharp rise in French bond yields. EUR/USD fell 0.6%, while GBP/USD lost 0.5%.
Across the region, AUD/USD fell 0.3%, while NZD/USD lost 0.4%.
In Asia, USD/JPY and USD/CNH were both little changed, while USD/SGD fell 0.2%.
Fed official keeps further rate hikes in play
San Francisco Federal Reserve President Mary Daly backed September’s rate hike as inflation risks increased, while leaving the door open to further policy tightening if price pressures remain persistent.
Daly highlighted tariffs, higher oil prices linked to Middle East tensions and AI-related impacts as potential sources of inflation pressure. If these prove temporary, further rate hikes may not be necessary.
However, a broader or longer-lasting rise in inflation, particularly alongside additional tariffs, could prompt further action from the Federal Reserve.
The prospect of further US rate hikes keeps the US dollar in focus against the Australian dollar.
The Aussie turned overnight with AUD/USD unable to break above 0.7000.
AUD/USD faces initial resistance at the 21-day EMA of 0.7034, followed by the 100-day EMA at 0.7054. Support remains at 0.6900. AUD/CNH and AUD/JPY are both trading at one-week highs.
China warns Europe against new trade barriers
China urged France and Germany to support open trade and avoid pushing the European Union towards more protectionist policies.
China’s Ministry of Commerce also warned against politicising national security concerns in economic and trade matters. The comments followed a French-German push for new EU powers that could exclude China and other countries from parts of the bloc’s single market.
USD/CNH remains just 0.2% above its 21 September low of 6.6912. The pair needs to move above the 50-day EMA at 6.7247 to improve its near-term outlook, with the 100-day EMA at 6.7561 the next level to watch.
Dollar index (DXY) remains dominant
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 5 – 10 October
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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.
