Forex Today: US Dollar retreats alongside bond yields as mood improves
Here is what you need to know on Friday, October 9:
The market mood improves on the last trading day of the week as investors react to United States (US) President Donald Trump's announcement that there would not be an attack on Iran prior to the midterm elections on November 3. In the second half of the day, the University of Michigan (UoM) will publish the Consumer Sentiment Index data for October.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.05% | 0.21% | -0.05% | -0.34% | -0.25% | -0.09% | |
| EUR | 0.14% | 0.09% | 0.36% | 0.09% | -0.17% | -0.06% | 0.03% | |
| GBP | 0.05% | -0.09% | 0.27% | 0.03% | -0.28% | -0.16% | -0.00% | |
| JPY | -0.21% | -0.36% | -0.27% | -0.26% | -0.55% | -0.45% | -0.28% | |
| CAD | 0.05% | -0.09% | -0.03% | 0.26% | -0.32% | -0.20% | -0.03% | |
| AUD | 0.34% | 0.17% | 0.28% | 0.55% | 0.32% | 0.11% | 0.30% | |
| NZD | 0.25% | 0.06% | 0.16% | 0.45% | 0.20% | -0.11% | 0.18% | |
| CHF | 0.09% | -0.03% | 0.00% | 0.28% | 0.03% | -0.30% | -0.18% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In a Truth Social post on Thursday, Trump said that they are having productive discussions with Iran and claimed that Oil is "flowing in record numbers of barrels through the Hormuz Strait." Although Trump noted that they won't attack ahead of the Midterm elections, the New York Times reported that Trump has ordered plans to be drawn up for options of returning to fighting against Iran. In the European morning on Friday, US stock index futures rise between 0.1% and 0.6%, the barrel of West Texas Intermediate (WTI) loses about 0.5% to trade near $90, while the US Dollar (USD) Index retreats toward 102.00 after posting marginal losses on Thursday.
In the meantime, Federal Reserve (Fed) Governor Christopher Waller said on Thursday that they need to hike the policy rate further but noted that they could remain flexible about the pace.
US yields reverse lower as Fed tone turns more dovish
According to Deutsche Bank, US rates saw “a sharp intraday turnaround,” with the 10yr Treasury yield “initially reaching an intraday peak of 5.35%, before ultimately closing down -5.7bps on the day at 5.23%.” The bank adds that Fed expectations “also shifted a bit dovishly,” after Fed Governor Waller remarked that further hikes “do not need to come at consecutive meetings,” prompting a softer market stance on the policy path.
USD/CAD holds steady above 1.4200 in the European morning on Friday after losing about 0.25% on Thursday. Later in the day, Statistics Canada will publish labor market data for September. Investors expect the Unemployment Rate to edge higher to 6.5% from 6.4% in August.
Following the sharp decline seen on Wednesday, EUR/USD kept its footing and registered marginal gains on Thursday. The pair struggles to gather bullish momentum but manages to stay afloat above 1.1200.
GBP/USD holds comfortably above 1.3200 early Friday and trades virtually unchanged on the week.
Gold benefited from falling US T-bond yields and closed in positive territory on Thursday. The precious metal preserves its recovery momentum and trades near $4,200, rising about 1.5% on the day.
USD/JPY gains traction early Friday and trades above 158.20, up nearly 0.3% on the day. Japanese Finance Minister (FM) Satsuki Katayama said on Friday that they will be launching a DOGE initiative, modelled after the US Department of Government Efficiency program, to reboot its spending review, widening scrutiny of tens of billions of Dollars in public funds and subsidies as they seek funding sources for Sanae Takaichi administration's costly policy pledges.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.