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Forex Today: US Dollar stretches higher on surging bond yields ahead of key data

Here is what you need to know on Wednesday, October 4:

The US Dollar continues to outperform its rivals mid-week as US Treasury bond yields keep on climbing higher. The US Dollar Index holds at multi-month highs above 107.00 and the 10-year US yield closes in on 4.9% in the European morning. ADP private sector employment and ISM Services PMI data for September, alongside August Factory Orders, will be featured in the US economic docket in the second half of the day. Market participants will continue to keep a close eye on comments from central bankers as well.

The data from the US showed on Tuesday that the number of job openings on the last business day of August stood at 9.6 million. This reading came in much higher than the July's reading and the market expectation of 8.8 million, attracting hawkish Federal Reserve (Fed) bets. In turn, US T-bond yields gained traction, Wall Street's main indexes turned south and the USD held its strength in the American trading hours.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.

 USDEURGBPCADAUDJPYNZDCHF
USD 0.99%1.09%1.01%1.98%-0.23%1.84%0.75%
EUR-1.00% 0.08%0.00%1.01%-1.25%0.85%-0.25%
GBP-1.10%-0.07% -0.08%0.93%-1.34%0.77%-0.33%
CAD-1.02%-0.01%0.11% 0.97%-1.25%0.83%-0.26%
AUD-2.02%-1.02%-0.94%-1.01% -2.28%-0.16%-1.29%
JPY0.20%1.23%1.31%1.25%2.19% 2.06%1.00%
NZD-1.86%-0.86%-0.77%-0.85%0.16%-2.12% -1.11%
CHF-0.77%0.24%0.32%0.25%1.25%-1.01%1.10% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Meanwhile, several Republicans in the House of Representatives sided with Democrats and ousted Speaker Kevin McCarthy with a 216-to-210 vote. Legislative activity in the House will pause until there is a new House Speaker. Republicans are set to meet on October 10 to discuss McCarthy's replacement. Markets remain risk-averse following this development with another government shutdown deadline coming in on November 17. Reflecting the sour mood, US stock index futures were last seen losing between 0.5% and 0.8%.

During the Asian trading hours on Wednesday, the Reserve Bank of New Zealand (RBNZ) announced that if left the policy rate unchanged at 5.5% as expected. “Committee agreed that interest rates may need to remain at a restrictive level for a more sustained period of time," the RBNZ said in its policy statement. NZD/USD came under bearish pressure and dropped below 0.5900.

After rising a few pips above 150.00 in the American session, USD/JPY fell sharply and lost more than 200 pips in a matter of minutes. This price action revived market chatter about a Bank of Japan intervention in the foreign exchange market. Japanese Finance Minister Shunichi Suzuki, however, said that he doesn’t want to “comment on whether Japan intervened in the FX market.” USD/JPY climbed back above 149.00 and stabilized there on Wednesday.

EUR/USD registered small losses on Tuesday but failed to stage a correction on Wednesday. At the time of press, the pair was trading within a touching distance of 1.0450. European Central Bank President Christine Lagarde will speak at the 2023 ECB Conference on Monetary Policy later in the day. Additionally, Eurostat will release August Retail Sales data.

GBP/USD rose a few pips above 1.2100 during the European session on Tuesday but lost its traction in the second half of the day. Early Wednesday, the pair trades modestly lower while holding slightly above 1.2050. 

Pressured by surging US yields, Gold price closed the seventh consecutive day in negative territory on Tuesday. In the European morning, XAU/USD stays on the back foot below $1,820.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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