Dollar weakens after US Treasury yields fall — Channel NewsAsia
In London, United Kingdom, the US dollar weakened after reaching an 18-month high. The dollar index, which reflects the US currency’s exchange rate against a basket of other currencies, fell by 0.2% to 102.03 points. As Channel NewsAsia reports, the exchange rate was affected by a sharp fall in US Treasury yields and restrained comments from Federal Reserve officials regarding a possible rate hike in October.
The previous day, the dollar reached its highest level in a year and a half after US inflation data came in higher than expected. On Thursday, the euro rose 0.5% from an 18-month low to $1.1216. Sterling also strengthened by 0.5%, to $1.3253.
US government bond market
Increased demand for US government bonds pushed the yield on 10-year securities down to 5.085% and that on 30-year securities to 5.428%. Both indicators were near three-week lows. Markets also reacted to stock fluctuations, particularly in technology companies, and concerns over substantial debt obligations of companies in the artificial intelligence sector.
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Societe Generale’s chief currency strategist Kit Juckes said that the dollar’s movements were influenced not only by bonds and the stock market, but also by investor positioning. According to him, some market participants expect a correction in the US currency, as prices already reflect many expectations of rate hikes.
Expectations for the Fed’s decision
After the inflation data were published, market estimates of the probability of a Federal Reserve rate hike in October rose sharply to 50%. At the same time, Federal Reserve Vice Chair for Supervision Michelle Bowman and San Francisco Federal Reserve Bank President Mary Daly said that the central bank could wait for a clearer economic picture before the October 27–28 meeting.
Investors were also awaiting US retail sales and producer price index data, as well as speeches by Federal Reserve representatives, including Chair Kevin Warsh, at the annual IMF and World Bank meetings in Bangkok. The Australian dollar fell 0.7% to US$0.6919 after an unexpected decline in employment in Australia in September, while the Japanese yen strengthened to 157.80 per dollar.
