The Swiss franc climbed to a 10-year high against the euro as expectations of stickier inflation and the prospect of lower US tariffs bolstered demand for the haven currency. The franc rose 0.4% to 0.91862 per euro, its strongest level since January 2015 when the Swiss National Bank ended the 1.20 exchange rate cap. It’s on track for a seventh daily gain, the longest winning streak since August 2024. Most Read from Bloomberg The currency’s advance follows comments from SNB Vice President Antoine Martin ...

Traders are increasingly skeptical that Japan’s new government will be able to shore up the yen by direct intervention as the currency slumps toward levels that previously drew authorities into the market. Unlike last year, when intervention took place in the run up to higher interest rates by the central bank, this time around Japan would be buying yen just as Prime Minister Sanae Takaichi signals her desire for a slowdown in rate hikes. Most Read from Bloomberg Officials would also be wading into the ...

Economic Outlook - The Australian dollar rose by 0.3% to $0.6504, buoyed by positive economic data from China and a more optimistic trade outlook [1][4] - China's economy grew by 1.1% in Q3, surpassing forecasts, with industrial output increasing by 6.5%, although the annual growth rate of 4.8% was the weakest in a year [2][3] - Analysts suggest that China is on track to meet its growth target of around 5%, indicating resilience against U.S. tariffs [3] Political Developments - The yen weakened initially as Sanae Takaichi appeared set to become Japan's next prime minister, following crucial political backing [1] - Takaichi's bid for premiership was bolstered by an alliance with the Japan Innovation Party, aligning more closely with her policy views after a previous coalition breakup [5][6] - The market is reacting positively to the potential for Takaichi's leadership, leading to bullish equities and bearish sentiment towards the yen [5] Market Sentiment - Market analysts indicate a sense of "mutually assured destruction" regarding U.S.-China trade tensions, with both sides acknowledging the risks of escalating tariffs [4] - There is a prevailing sentiment that markets will remain jittery until explicit announcements of de-escalation are made [5]

Currency Market Insights - The U.S. dollar is experiencing a third consecutive daily loss against the euro, while it is slightly increasing against the yen due to ongoing U.S.-China tensions and dovish comments from Federal Reserve officials [1] - The dollar index is down 0.05% at 98.64, indicating a potential weekly decline of around 0.3% [2] - U.S. Treasury yields are near multi-week lows, with the benchmark 10-year yield just above 4%, which is putting pressure on the dollar amid concerns over a prolonged U.S. government shutdown [3] Rare Earths and Trade Relations - Investors are closely monitoring China's recent expansion of rare earth export controls, which has been criticized by U.S. officials for potentially disrupting global supply chains [5] - There is speculation that China's export controls may be a bargaining tactic to gain concessions from the U.S. [5] - The escalation in Sino-U.S. trade tensions is prompting reactions from European governments, highlighting the potential impact on global supply chains and European output [6] European Political Developments - The euro reached a one-week high, increasing by 0.09% to $1.1651, following the survival of French Prime Minister Sebastien Lecornu in a no-confidence vote [7]

Core Insights - The US dollar has strengthened against most major currencies due to renewed trade tensions with China, prompting investors to seek safe-haven assets [2] - The Bloomberg Dollar Spot Index increased by 0.3%, reaching its highest level since August 1, as government bonds rallied and stock prices fell [2] - Analysts from ING suggest that the dollar's renewed status as a safe haven and additional bullish momentum could support its value in the near term [3] Currency Movements - The Australian dollar experienced a 1% decline, marking its lowest value in nearly two months, while the British pound reached a new two-month low following labor data from the UK [2] - Options markets indicate a rising demand for bullish dollar positions, particularly against the pound, Australian dollar, and Canadian dollar [4] - Conversely, traders are taking a bearish stance on the Japanese yen, which is currently leading G-10 currencies [4] Market Sentiment - Traders are closely monitoring a keynote speech by Federal Reserve Chair Jerome Powell for insights on whether the market's current pricing of the central bank's outlook is overly dovish [5]

Market Trends - Investors are selling off US dollars, euros, and yen [1] - There's a surge in the price of Bitcoin, gold, and silver, indicating a shift to alternative assets [1] - Wall Street has termed this investment behavior as "debasement trading" [1]

Core Insights - The yen has weakened significantly, reaching 152.34 against the dollar and a record low against the euro, following Sanae Takaichi's unexpected victory as the new leader of Japan's ruling Liberal Democratic Party [2][4] - Market expectations for a Bank of Japan interest rate hike have diminished, with a 25% chance of a move at the BOJ's upcoming meeting, down from 57% prior to the leadership vote [5] Currency Performance - The yen's depreciation has sparked renewed interest in the carry trade strategy, where investors borrow low-yielding yen to invest in higher-yielding currencies [5] - Bank of America has revised its forecast for the yen to end the year at 155 per US dollar, up from a previous estimate of 153, citing increased political and fiscal risks [6] Market Reactions - Hedging costs against further yen depreciation have surged, with premiums for hedging now at their highest level in over three years [7] - Analysts from ING noted that the new government under Takaichi is expected to influence a stronger economy, leading to a steeper yield curve and an equity rally [5]

Economic Impact of U.S. Government Shutdown - The U.S. government is approaching a potential shutdown, which would halt data releases from the Labor and Commerce departments, including crucial jobs data scheduled for Friday [6][4] - The dollar index fell to 97.633, marking its lowest point since last Wednesday, as uncertainty surrounding the shutdown looms [6][4] - A mixed reading from the Job Openings and Labor Turnover Survey (JOLTS) indicated a marginal increase in job openings while hiring declined, reflecting a softening labor market [6][4] Currency Market Reactions - The euro remained stable at $1.1731 after reaching a high of $1.1762, while the dollar slightly increased to 148.15 yen following a three-day decline [6][4] - Analysts predict that the USD may continue to decline if political discussions suggest an extended government shutdown, with weak economic data further weighing on the currency [4][6] Bank of Japan's Policy Outlook - The Bank of Japan (BOJ) has shown a more hawkish stance recently, with officials indicating an increasing need for policy tightening [5][6] - Traders currently estimate a 39% chance of a quarter-point rate increase in Japan on October 30, while a quarter-point cut by the Federal Reserve is seen as nearly certain at around 97% [7][6]

Core Viewpoint - President Trump's demand for South Korea to transfer $350 billion in cash could severely impact South Korea's financial markets and economy, with ongoing negotiations highlighting tensions between the two nations [1][6]. Group 1: Financial Implications - South Korea's foreign exchange reserves stand at $410 billion, and a sudden transfer of $350 billion could destabilize the won, reminiscent of the 1997 financial crisis [3]. - The Bank of Korea and the Federal Reserve could establish a swap line to provide dollar liquidity, potentially mitigating shocks to foreign-exchange markets [4]. Group 2: Comparison with Japan - South Korea argues that its financial situation differs significantly from Japan's, which has $1.3 trillion in reserves and a more internationally recognized currency, the yen, which holds a 17% global market share compared to the won's 2% [5]. Group 3: Political Dynamics - President Lee Jae-myung has warned that U.S. demands could lead to a financial calamity similar to past crises, but Trump remains firm on requiring the payment "upfront" [2][6]. - The recent raid on a Hyundai plant in Georgia, resulting in the arrest of Korean workers, has further strained U.S.-South Korea relations [6][7].

Core Viewpoint - The U.S. dollar has strengthened significantly, particularly against the Japanese yen and the British pound, indicating a shift in currency dynamics and potential implications for international trade and investment strategies [1] Group 1: Currency Strength - The U.S. dollar's strength is particularly notable against the yen, which may affect export competitiveness for Japanese companies [1] - The dollar has also gained against the British pound, suggesting potential impacts on U.S.-UK trade relations and investment flows [1] Group 2: Economic Implications - A stronger dollar could lead to increased costs for U.S. exporters, potentially affecting their profit margins and market share abroad [1] - Conversely, it may benefit U.S. consumers by lowering the cost of imported goods, influencing domestic consumption patterns [1]