The US dollar is mostly softer as AI worries resurface. A dismal showing of an IPO for an AI infrastructure company in South Korea seemed to renew last week’s concerns. The Canadian dollar is leading the charge today after the secessionist referendum in Alberta lost handily. The UK reported better-than-expected employment figures, which helped lift sterling.
In addition to the AI concerns, investors are monitoring two other developments today. First, Iranian strikes are lifting oil prices. Brent is at a five-month high and the December WTI contract is above $100. The Norwegian krone often is sensitive to oil prices, and it is the second strongest G10 currency today behind the Canadian dollar. Second, the social/political tensions in several European countries remain a concern. French 10-years are at new highs, approaching 5% and Italian bonds are also under pressure. The peripheral premiums over Germany are widening.
Prices
G10
• The euro was traded in a narrow range in North America yesterday, mostly between $1.1210 and $1.1230. It spent the entire session below last week’s close (~$1.1240). The early markdown in the Asia Pacific session to slightly below $1.1185, and the single currency largely held above $1.12 since early European turnover yesterday. It continues to trade quietly between $1.1205 and $1.1235 so far today. Options for 3.1 bln euros struck at $1.1265 expire today.
• Firmer US rates helped lift the dollar against the Japanese yen. The greenback made a new session high in North America near JPY158.55. It edged up to JPY158.60 today to fray the 200-day moving average but has come back off to approach JPY158 in Europe. A break could signal a test on last week’s lows, near JPY157.55.
• Sterling traded with a slightly heavier bias yesterday, but it was confined to about a 20-tick range on both sides of the pre-weekend settlement. It slipped ever so slightly below $1.3300 in the NY afternoon. It has held above $1.3300 today and reached almost $1.3360 on the back of better-than-expected jobs data. Last week’s high was a little above $1.3370. It has not settled above $1.34 since September 15.
• The Canadian dollar strengthened for the third consecutive session yesterday. Despite a little softer than expected Canadian September CPI, the two-year yield jumped 10 basis points and the narrowing of its discount to the US may have helped extend the Canadian dollar’s recovery. The greenback was sold to almost CAD1.4070, a three-and-a-half-week low. The US dollar also surpassed the (38.2%) retracement of the rally from the November 8 low (~CAD1.3760). News that the secessionist referendum lost handily in Alberta (~75% rejected it) the Canadian dollar is trading firmer. The US dollar eased to below CAD1.4050. The (50%) retracement is about CAD1.4030. Chart support is seen around CAD1.4000.
• The Australian dollar traded firmly yesterday, and although it reached a three-day high, it stalled in front of $0.7000. It edged a little closer to $0.7000 but has not traded above it, though it could in North America today. It has not settled above $0.7000 in three weeks. In the middle of last week, it reached an intraday high of almost $0.7015. The $0.7025-50 area holds the 200-day moving average and the (38.2%) retracement of the losses since last month’s peak (~$0.7250).
EM
• The US dollar initially rose against the Mexican peso yesterday and poked slightly above MXN18.55. However, the greenback trended lower in Europe and North America and slipped below MXN18.41 before consolidating. A near-term shelf has been forged MXN18.34 in the second half of last week. The dollar slipped to around MXN18.3750 today before it rebounded to MXN18.4735. It looks poised to re-test yesterday’s high amid a risk-off session.
• The dollar slipped against the offshore yuan yesterday and posted a loss for the third consecutive session. That matched the longest losing streak in two months. It has eased again today and reached almost CNH6.6765, encouraged by the PBOC. The PBOC continues to guide the yuan higher. The dollar’s fix was set at CNY6.7351 at the end of September and CNY6.7208 yesterday and CNY6.7200 today.
• Indian markets are closed today for a national holiday (Dasara).
Other Markets
• The Nasdaq Composite rose by about 1.5% yesterday, its best gain in nearly a month, even if not fully retracing the pre-weekend loss of 2.15%. However, the disappointing performance of a South Korean AI-infrastructure company IPO (Elice) renewed the concerns over AI and is weighing on equities more broadly. South Korea’s Kospi fell by 3.7% but all the large bourses in the region fell. A notable exception in Indonesia, where measures adopted to address the MSCI concerns helped lift the Jakarta Composite by almost 5.7%. Europe’s Stoxx 600 is off around 0.75%, and US Nasdaq 100 and S&P 500 futures are trading with a heavier bias.
• Benchmark 10-year yields jumped in Europe and North America yesterday. The French 10-year premium widened by 11 bp over Germany yesterday to 148 bp. It was a new settlement high since the end of 2011. The French yield reached 4.83%. The high from earlier this month was almost 5%. With the Nasdaq rallying, the 10-year US Treasury yield jumped a little more than seven basis points (to almost 5.15%) after falling about 16.5 bp last week. The 10-year JGB yield slipped a basis point today (now below 2.89%). European yields a narrowly mixed, but the 10-year French and Italian bond yields are a couple of basis points firmer, and their premium to Germany is widening. The 10-year US Treasury yield is off a little more than a basis point.
• After reaching $4190 yesterday, gold was sold to new session lows in North America, near $4139. It frayed the 20-day moving average for the second consecutive session but has failed to close above it since September 3. It has been sold to a new three-day low today, slightly below $4112. Last week’s low was around $4073. Silver traded quietly yesterday between slightly above $57.00 to about $57.85. It was also sold to three-day low today, around $56.40, before recovering back above $57 in late morning European turnover.
• December WTI traded firmly within the pre-weekend range. The early pullback to almost $96.70 was bought and the contract recovered to $98.80 in the North American afternoon. The pre-weekend high was about $99.35, and it took it out today, rising to almost $101.
Data
• The US reports September housing starts, which the median forecast in Bloomberg’s survey anticipates the first increase since June. Still, despite higher prices and interest rates, housing starts in the first eight months of the year are a modest 1.1% lower year-over-year. Permits, a leading indicator, are off less than 1%. Pending home sales had a strong Q2 but fell in July and August. Still, they are nearly flat on year-over basis this year. The October Philadelphia’s Fed non-manufacturing survey is also due. The manufacturing survey, released last week, was weaker than expected at 20.9, down from 37.8. The non-manufacturing survey has been negative this year, except in July, and also contracted every month last year.
• The eurozone’s August current account surplus stands at 8.7 bln from 27.6 bln in July and nearly 20.6 bln euros in August 2025. Despite China’s import penetration, EMU’s current account surplus is modestly lower this year. It averaged 23.1 bln euros in the first eight months of 2025 and about 20.9 bln euros in the first eight months of this year. The ECB’s staff expects it to narrow to about 1.5% of GDP this year from 1.7% last year. Separately, construction output in August jumped 1.8% after July’s flat reading was revised to +0.2%. Despite the infrastructure efforts, construction output has fallen by an average of 0.1% this year after rising by an average of 0.2% a month in the first eight months of 2025.
• Germany’s ZEW survey showed a deterioration of expectations (28.1 vs. 34.7). It was the first decline since April. The assessment of the current situation improved (-35.9 vs. -47.1). It was the fourth consecutive improvement and is the best since June 2022.
• UK labor market was little changed. Average weekly earnings were narrowly mixed, and the ILO measure of unemployment rate fell to 4.7% from 4.9%. That matched the lowest rates since April 2025. The number of payrolled employees (similar to the establishment survey in the US) unexpectedly rose by 13k and the August loss of 26k was revised to an increase of 1k. by 8k in September. The number of people on payrolls had not risen since January. The claimant count jumped by 30.3k, but the sting was lessened by the revision in the August series to 7k from almost 28k. September CPI is due tomorrow and the market the headline to accelerate to 3.4% from 3.1% and the core rate to 2.8% from 2.6%.
• As widely expected, Chinese banks left the loan prime rates steady at 3.0% and 3.50% for the one-year and five-year tenors. The PBOC signaled that its overnight reverse repo rate will replace the current seven-day rate as the new policy benchmark. Since the effective rate is lower than the seven-day rate, there is a modest easing implication.
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