The US dollar index fell slightly on Monday, undercut by a decline in the 10-year Treasury yield and a weak US homebuilder report.
The dollar index, which measures the value of the US dollar against a basket of six other major currencies, fell 0.11% to 103.77. The decline came as the yield on the 10-year Treasury note fell 3 basis points to 4.16%.
A decline in Treasury yields makes US assets less attractive to foreign investors, which can weigh on the dollar.
The dollar was also undercut by a weak NAHB US housing market index, which fell 5 points to a 5-month low of 45. The reduced confidence expressed by US homebuilders suggests that home-building activity may weaken in the coming months.
However, the dollar saw underlying support from expectations for the US Federal Reserve to remain hawkish at its upcoming meeting on Tuesday and Wednesday. The markets are expecting the Fed to maintain a hawkish tone and remain open to one last rate hike before the end of the year.
Looking ahead, the markets are discounting a 31% chance that the Fed will raise the funds rate by 25 basis points at its next meeting on November 1, and a 14% chance for that 25 basis point rate hike at the following meeting on December 13. The markets are then expecting the Fed to begin cutting rates in 2024 in response to an expected slowdown in the US economy.
EUR/USD
The euro-US dollar pair was little changed on Monday, trading around 1.0050.
USD/JPY
The US dollar-Japanese yen pair rose 0.10% to 143.80. The Japanese markets were closed on Monday for a holiday, but will reopen on Tuesday.
Precious Metals
October gold futures rose 0.38% to settle at $1,707.30 per ounce. December silver futures rose 0.48% to settle at $18.47 per ounce.
Precious metals found support from the slightly lower dollar and the decline in the 10-year Treasury yield. However, silver was undercut by higher German and UK bond yields and fears of weaker global economic growth.
Conclusion
The US dollar index fell slightly on Monday, undercut by a decline in the 10-year Treasury yield and a weak US homebuilder report. However, the dollar saw underlying support from expectations for the Fed to remain hawkish at its upcoming meeting.
The euro-US dollar pair was little changed on Monday, trading around 1.0050. The US dollar-Japanese yen pair rose 0.10% to 143.80. October gold futures rose 0.38% to settle at $1,707.30 per ounce. December silver futures rose 0.48% to settle at $18.47 per ounce.