DXY, which started the week with a decline, tried to recover in Asian trading hours, but turned down again in European hours with the increase in euro demand. However, DXY, which saw an increase in demand again at 105.9, continues to fluctuate in the 106 region while turning its direction upward once again. While the dollar, supported by the strong outlook of the US economy, assumes the role of safe haven currency, it is also supported by the expectation that the Fed will keep interest rates high for a long time – although there is no expectation of an interest rate increase in November.
On the other hand, when looking at the October outlook of DXY, it is seen that the upward trend that started in July has left its horizontal outlook this month. The dollar index was subject to selling pressure at the 107 level in October, but the quick response to the sales in the 105 region ensured that the index remained flat in the narrow band.
Going back to today, the development that pulled DXY down during the day was the rapid increase in demand for the euro. However, while the rise in EUR/USD remained limited at 1,067, it was seen that the parity turned downwards again in the last hour. The development that moved EUR/USD upward was the inflation data announced in the Euro Zone today.
While inflation in Europe was announced as 0.1% on a monthly basis, it remained below expectations of 0.3%. Thus, while the Eurozone’s annual inflation was 2.9% against the expectations of 3.1%, these data were priced positively by the market. However, Euro Zone GDP data pointed to 0.1% growth for the last quarter. This rate remained below expectations of 0.2%, limiting the positive outlook coming from the CPI data.
Employment cost and S&P/CS house price index data, released during US trading hours, partially supported DXY. Meanwhile, among the US Treasury yields, 10-year bonds partially recovered after falling to 4.8% and moved towards 4.85%. While 2-year bond yields tested the 5% level today, they turned upward again.
On the USD/JPY front, the Bank of Japan maintains its dovish view and persistently maintains its current policy and promises to reduce inflation below 2% by 2025, continuing to support the depreciation of the Japanese yen. The parity, which recorded a rapid rise as of the last hour, reached the 151 level and renewed its peak level of the last year.
As a result, although all eyes are on the Fed decision to be announced tomorrow, the fact that the Fed’s route is almost clear reduces the possibility of a surprise decision. Accordingly, it seems to be a general view that the outlook for the dollar for the last quarter of the year may be shaped by the steps to be taken by the European Central Bank and the Bank of Japan, based on current risks.