US dollar rises despite softer inflation
Financial markets remain constrained by the dominant themes of higher bond yields and a stronger US dollar, with softer-than-expected US inflation failing to improve sentiment.
US headline annual PCE inflation for September was reported at 3.4%, below the 3.7% forecast, while the core measure came in at 3.0% versus expectations of 3.3%.
The USD index gained further, reaching fresh two-month highs, while the benchmark US 10-year Treasury yield climbed from 5.24% to 5.28%. The key yield measure started September at just 4.75%.
By contrast, the Aussie was the hardest-hit major currency, falling 0.5% after Australia’s August inflation report also came in below expectations. Headline annual CPI was reported at 4.0% versus 4.1% expected, while the core measure, or trimmed mean, came in at 3.6%, in line with expectations.
In other markets, NZD/USD and EUR/USD both fell 0.1%, while GBP/USD gained 0.3%.
BoJ rate path keeps yen supported
Former Bank of Japan board member Makoto Sakurai expects the central bank to lift its policy rate from 1.25% to 1.5% in December, followed by 1.75% in the first quarter of 2027 and 2.0% by mid-year.
He expects higher fuel costs, a weaker yen, and AI-related investment demand to keep inflation pressures elevated and support further policy tightening.
An October rate increase remains possible if inflation forecasts are revised materially higher. Sakurai also warned that even a 2.0% policy rate may not be sufficiently restrictive if inflation remains near 3%.
Markets have fully priced in a BoJ rate hike by the December meeting.
USD/JPY is holding near the key psychological level of 157.00, more than 4% below its 23 July high of 163.99. Resistance is located near the 50-day EMA at 157.98 and the 100-day EMA at 158.53, while 156.50 remains important support.
Stronger China PMIs put yuan in focus
China’s official manufacturing PMI rose to 50.1 in September from 49.8, returning to expansion as production increased 1.3 points to 51.7.
New orders eased to 50.5 and export orders slipped to 50.0. The non-manufacturing PMI also improved to 50.2 from 49.0, lifting the composite PMI to 50.7.
Additional survey data pointed to broader momentum, with manufacturing PMI rising to 52.1, services PMI to 51.6 and the composite PMI to 52.4.
USD/CNH remains just 0.2% above its 21 September low of 6.6912. A break above the 21-day EMA at 6.7124 would improve the short-term outlook and open the way towards the 50-day EMA at 6.7287.
RBA no help for Aussie
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 21 to 26 September
Have a question? [email protected]
*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.
