The US dollar is declining against major currencies for the second session in a row. By the morning of October 9, EUR/USD rose to the 1.1225-1.1230 area, and USD/JPY fell below 158.00. The main factor was the pullback in US government bond yields.
Where major pairs are trading
EUR/USD is near 1.1225-1.1230 and is rising for the second day in a row. GBP/USD is trading near 1.3240. NZD/USD is in the 0.5615 area. AUD/USD rose above 0.6950, adding about 0.10%. USD/CAD declined to 1.4210 and is also falling for the second day. USD/JPY is trading near 157.71, losing about 0.24%.
Why the dollar turned downward
The yield on 10-year US Treasuries failed to hold near recent highs. It closed at about 5.22%, although a day earlier it had risen to levels the market had not seen since 2002. Lower yields reduce the appeal of dollar assets and weaken support for the US currency. An additional factor was the easing of geopolitical tensions around Iran.
What changed after Trump's statement
The market reacted to Donald Trump's statement that the US does not plan a strike on Iran before the midterm elections. This reduced part of the geopolitical premium that had previously supported oil and demand for the dollar. The currency was also affected by more cautious comments from Fed officials about the pace of further rate hikes.
Where safe-haven demand shifted
Part of the demand for safe-haven assets shifted into the Japanese yen and the Swiss franc. This is especially noticeable in USD/JPY, which moved below 158.00. Additional demand for safe-haven currencies appeared amid a decline in AI-related stocks on Wall Street.
What is happening with the euro
The rise in EUR/USD is now primarily driven by dollar weakness. Since the start of the month, the pair has remained in a wide range. On the upside, the euro is constrained by problems in the French debt market and persistent economic uncertainty in the region. Therefore, the current move cannot yet be considered a sign of independent strength in the European currency.
What is happening with the pound
GBP/USD is also receiving support from dollar weakness. At the same time, internal risks related to UK fiscal policy remain for the pound. In crosses with the yen, the pressure is more noticeable. EUR/JPY is holding near 177.40 within a downward channel. GBP/JPY ended Thursday near 208.87 after moving in a range of about 208.20-209.40.
What's next
The next important reference point will be the University of Michigan consumer sentiment index for October. Along with it, the market will monitor US consumers' inflation expectations. But the main question for the dollar remains the same - how quickly and how far the Fed is prepared to move the rate further. If Treasury yields continue to decline, pressure on the dollar may persist.
Did you short the dollar tonight?
Part of the move occurred during the Asian session, so position rollover rules are especially important for such trades. Different prop firms have different terms for overnight trading, weekend rollover rules, and the timing of daily drawdown calculation. If the program's server time differs from local time, the new trading day and limits may be recalculated at an unexpected moment. Such parameters are best checked before opening a position.