Greenback keeps on climbing, US dollar index at 10-month high
THE euro, pound and yen were all pinned at multi-month lows on Tuesday (Oct 3), with the Japanese currency on the brink of weakening past the psychological 150-per-US dollar level, as surging US Treasury yields kept the US dollar firmly on the front foot.
The euro was steady on the day at US$1.0476, around its weakest since early December 2022, after a near-1 per cent plunge on Monday when US manufacturing data came in strong and Federal Reserve officials said monetary policy would need to stay restrictive for “some time”.
The combination of that and an agreement to avert a partial US government shutdown sent benchmark Treasury yields to as high as 4.706 per cent on Tuesday, a 16-year peak, in turn driving the US dollar higher.
“There are two very powerful things that are supporting the US dollar at the moment, the real rate differential is favourable to the US and the US economy is outperforming,” said Samy Chaar, chief economist at Lombard Odier.
Real interest rates, unlike nominal ones, factor in inflation which is falling faster in the US than in Europe.
Chaar said he also thought there were technical factors driving the sell-off in US Treasuries, possibly capitulation by major investors, as the economic situation, in his view, did not justify yields continuing to rise.
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The pound fell to its lowest since March and was last down 0.26 per cent at US$1.20565, and traders were focused on the Japanese yen which was flat on the day at 149.89 per US dollar, but still around its weakest in nearly a year and just shy of the 150-per-US dollar level that some see as potentially pushing Japanese authorities to intervene to prop up the currency.
Japanese Finance Minister Shunichi Suzuki said on Tuesday that authorities were watching the currency market closely and stood ready to respond, but also said any decision on currency market intervention would be based on volatility, not specific yen levels.
Although Japanese officials have stated “that the government is not watching any particular level ... interventions had previously occurred around 150, signifying official discomfort when the (yen) weakens beyond this point”, said Wei Liang Chang, foreign exchange and credit strategist at DBS.
The US dollar index, which tracks the unit against six peers, was up 0.13 per cent at 107.16, at its highest since November.
The main data points in the US this week relate to the labour market. “(Tuesday’s) US Jolts (Job Openings and Labour Turnover Survey) job openings and non-farm payrolls on Friday can be a catalyst to push up US yields and the US dollar if they surprise to the upside,” said Carol Kong, economist and currency strategist at Commonwealth Bank of Australia.
The Australian dollar slipped to an 11-month low of US$0.6302, down as much as 0.95 per cent following the Reserve Bank of Australia’s decision to hold rates, while Russia’s rouble weakened past the symbolic threshold of 100 to the US dollar before recovering slightly in early trade.
The US dollar was up 0.5 per cent against the Swiss franc at 0.9215 at a six-month high after Swiss inflation dipped and came in slightly below expectations. REUTERS
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