The United States Dollar (USD) weakened against several major global currencies during Tuesday’s (October 20, 2026) trading session, failing to sustain the gains made previously. The US Dollar Index (DXY), which measures the greenback’s strength against six major currencies, fell 0.19% to 101.79, down from 101.98 on Monday. This decline was driven by falling US government bond yields and increased demand for Japanese yen-denominated assets, prompting investors to trim their long positions in the dollar.
The strengthening of the yen became a primary market focus following a record-high demand for a 20-year Japanese government bond auction. The bid-to-cover ratio reached 5.84 times—the highest level since the instrument was introduced in 1987. This surge in demand pushed the yield on 20-year Japanese bonds down by 6 basis points to 3.71%. Consequently, the yen strengthened against the USD, with the USD/JPY pair falling 0.3% toward the 158.10 level—marking the yen’s best performance in three weeks ahead of the Bank of Japan’s (BOJ) monetary policy review.
Meanwhile, the euro showed signs of recovery as political tensions and social unrest in France began to subside. The EUR/USD pair rose 0.2% to US$1.1231, having previously touched its lowest level since May 2025. Although the security situation in several French cities has come under better control, concerns regarding the country’s fiscal position continue to weigh on the market. The yield spread between 10-year French and German government bonds widened to 147.3 basis points, reflecting a heightened perception of risk among investors. Attention is now focused on the parliamentary debate regarding France’s 2027 budget, particularly the government's efforts to curb a budget deficit that has reached 5.4% of its gross domestic product (GDP).
Meanwhile, the British pound has strengthened by 0.4% against the US dollar, reaching US$1.3350, bolstered by UK labor market data that showed stronger-than-expected wage growth and job creation. The strengthening of several major currencies has further constrained the US dollar's movement in the global market. Looking ahead, investors will be closely monitoring US bond yields, the Bank of Japan’s (BOJ) monetary policy decisions, and political and fiscal stability in Europe to gauge the direction of the foreign exchange market. Should the downward pressure on US bond yields persist, the dollar could weaken further against other major global currencies.
Conclusion
The decline of the US Dollar Index (DXY) to the 101.79 level indicates a loss of momentum for the greenback, driven primarily by falling US bond yields and increased demand for the Japanese yen. The strengthening of the yen has been a key factor weighing on the dollar, while the recovery of the euro and the British pound has added further pressure.
If the DXY continues to weaken, it could create a positive sentiment for global gold prices and the currencies of emerging markets, including the Indonesian rupiah. Nevertheless, policy developments from the Federal Reserve and the BOJ, as well as political uncertainty in Europe, remain critical factors for investors to watch.