The US dollar strengthened in trading on Monday (October 19), with the DXY index rising 0.17% to 101.97. The greenback drew support from a rebound in AI-related stocks following a sharp sell-off last week, while political and fiscal turmoil in France weighed on the euro. The EUR/USD pair fell 0.24% to US$1.1212, as a widening spread between French and German bond yields reflected an increased risk premium on French assets.
In Asia, currency movements were more varied. The AUD/USD pair rose 0.49% after China’s economy grew faster than anticipated, providing a boost to the Australian dollar given the strong trade ties between the two nations. Conversely, the USD/JPY pair climbed 0.35% to around 158.49, indicating that the yen remains under pressure, even as the Bank of Japan (BOJ) has begun signaling the possibility of future interest rate hikes.
The Canadian dollar also weakened against the greenback following an uptick in Canadian inflation, though hawkish remarks from Bank of Canada Governor Tiff Macklem provided some support for the currency. Markets are now watching to see whether energy price pressures will prompt the Canadian central bank to maintain a more restrictive policy stance.
In the US, the rebound in AI stocks has served as a key catalyst for the dollar. Previously, concerns regarding the high costs of AI-related investments had led investors to reduce their exposure to US assets. However, the recovery in tech stocks has renewed interest in dollar-denominated assets.
Meanwhile, Federal Reserve policy remains a limiting factor. Kevin Warsh offered no clear signals regarding the future direction of interest rates, leaving the market to anticipate that the Fed will hold rates steady at its October meeting. Nevertheless, the possibility of a rate hike in December remains a point of focus.