Dollar firms as 24-year high in US yields drags EUR/USD fixing lower

The dollar's brief dip did not last. A fresh surge in US Treasury yields to their highest levels in more than two decades pulled the greenback back up on Wednesday, and the euro gave back all of its French-budget rebound.

What moved and why

FXStreet reports that the US 10-year yield touched 5.35% and the 30-year reached 5.724%, both 24-year highs, as investors demanded a higher premium on US debt amid inflation and fiscal worries. Earlier in the European session, investingLive noted the 30-year had already hit 5.70%.

Oil added to the pressure. According to FXStreet, Brent is back above $100 a barrel after Iran stepped up attacks on tankers in the Strait of Hormuz, and the US Dollar Index climbed back near its 18-month high. FXStreet separately reports that International Energy Agency members back a faster release of 100 million barrels of oil stocks. The same yield and oil shock hit crypto too, as our sister site covers in Bitcoin's slide on oil and bond yields.

The fixing as a reference point

The ECB reference rate for EUR/USD on 7 October was 1.1177, down 0.82% from 1.1269 on 6 October. That is the lowest of the last five fixings and 1.57% below the 30 September level. FXStreet said the pair traded around 1.1195 during the session, near a 17-month low, with French fiscal risks still weighing. Chart: EUR/USD and the Dollar Index.

Other 7 October fixings:

• GBP/USD 1.3205, down 0.54%. Investing.com reports the pound dipped on the firm dollar while EUR/GBP fell to a 16-month low.
• AUD/USD 0.6951, down 0.44%. FXStreet said the drop snapped a three-day winning streak as RBA hike bets faded.
• USD/JPY 158.23, up 0.09%, holding near 158.
• USD/CHF 0.8329, up 0.28%.
• USD/MXN 18.094, up 0.83%, reversing part of the previous day's peso rally.
• USD/CAD 1.4253, little changed. Investing.com reported on 6 October that the loonie was near an 18-month low despite a surprise trade surplus.

Central banks and data in the news

Fed. The New York Fed's September consumer survey showed one-year inflation expectations at 3.9%, up from 3.6% and the highest since 2023, according to investingLive. Three-year expectations rose to 3.3% from 3.2%, while the five-year measure was flat at 3%. Separately, investingLive notes the US August trade deficit widened to $105.6 billion from $92.8 billion, with imports at a record $420.8 billion.

RBA. Deutsche Bank argues that households are coping with hikes as their debt-to-asset ratio hits a 1997 low, which keeps a fifth hike in November in play, investingLive reports.

BoJ. Japanese real wages rose for an eighth straight month, with regular pay holding near 4%, which investingLive says backs the case for further BoJ tightening.

Gold. TD Securities sees heavy CTA selling in precious metals, with gold pressured by surging real rates and a stronger dollar, FXStreet reports.

What to watch next

1. Fed minutes. FXStreet frames both the euro and Aussie moves as coming ahead of the release.
2. US jobless claims. investingLive says the data will test whether September's weak 29k payrolls gain is turning into layoffs.
3. US Treasury yields and Brent, after both broke to multi-year highs on Wednesday.
4. UK budget on 28 October. Investing.com has a factbox on Chancellor Healey's options.
5. RBA in November, where Deutsche Bank sees a fifth hike as possible.