Rising Stocks and Bond Yields Supported the US Dollar

Market Reviews

The US dollar strengthens versus British pound, Swiss franc and Japanese yen, but it is holding in range against euro, Canadian dollar and Australian dollar. The dollar index breached 96.98 key resistance, supported by growth in stocks and Treasury yields. US 10 year yield closed up 0.23 at 3.110. 30-year yield closed up 0.027 at 3.356.

On stock markets, DOW added 1.77%. S&P 500 and NASDAQ also closed up 1.57% and 1.58% respectively. In Asia, Nikkei gained 2%, Singapore Strait Times rose 0.66%, China Shanghai SSE added 1.07%, Hong Kong HSI grew 0.91%.

The Bank of Japan left its monetary policy unchanged and kept short-term interest rates at the level of -0.1%. The target yield of a 10-year JGB Treasury bond remained at around 0%. The Bank of Japan also kept its commitment to acquire Japanese government bonds worth 80 trillion yen per year.

In the updated economic projects of the Bank of Japan, fiscal 2018 growth forecast was downgraded from 1.5% to 1.4%. Growth forecasts for 2018 and 2019 were kept unchanged at 0.8%. Fiscal 2018 core CPI projection was lowered notably to 0.9%, down from 1.1%. For fiscal 2019 and 2020, ex-sales-tax-hike core CPI projections were also lowered, to 1.4% and 1.5%, down from 1.5% and 1.6% respectively.

The Australian dollar fell amid negative data from Australia and China. The official China PMI manufacturing dropped to 50.2 in October, down from 50.8 and missed expectation of 50.6. Official PMI non-manufacturing dropped to 53.9, down from 54.9 and missed expectation of 54.9. Australia CPI rose 0.4% qoq, 1.9% yoy in Q3, versus expectation of 0.5% qoq, 1.9% yoy. The annual rate slowed quite notably from 2.1% yoy. Trimmed mean CPI was unchanged at 1.8% yoy. Weighted median CPI was also unchanged at 1.7% yoy.

Also released today, New Zealand ANZ Business Confidence improved to -37.1 in October, up from -38.3. New Zealand building permits dropped -1.5% mom in September.