With markets in China, South Korea, Hong Kong and India being closed for public holidays, the dollar managed to recover from earlier losses against its peers in Asia – helped by higher US Treasury yields – while the euro recorded a downtrend in the wake of a political crisis in Spain.
The dollar posted gains versus a basket of major currencies during the Asian session on the back of higher US Treasury yields, with the dollar index rising by 0.40% on the day to 93.26. The 10-year US Treasury yields rose from Friday’s closing of 2.326 percent to 2.360 percent.
The yen fell by 0.35% versus the dollar, driving dollar/yen to 112.86. The yen’s weakness and a stronger global demand boosted business confidence in Japan as the BOJ’s Tankan Large Manufacturers index reached 22 in the third quarter, the highest level since September 2007, while analysts anticipated the index to rise by one point to 18. The index for large non-manufacturers remained steady at 23 as expected. Japanese big manufacturers were also the most confident in a decade about their business activities, leading the corresponding index to touch 19, up from the 15 seen in the previous quarter and above the 16 that was projected by analysts.
The euro opened weak against the greenback in Asia after Sunday’s independence vote in Catalonia, which was declared illegitimate by the Spanish government, ended into violence, exacerbating political tensions in the country. Hundreds of people were injured after police forces approached voting polls to prevent the banned referendum, using sticks and rubber bullets. Even though initial estimates showed that 90% of the votes were in favor of independence, this would be a unilateral declaration of independence as the ballot does not have a legal status.
Euro/dollar was 0.43% down on the day at 1.1762, while euro/pound was 0.10% weaker at 0.8806.
In other currencies, the aussie fell by 0.29% to $0.7810 after the AIG manufacturing index dropped by 5.6 points to 54.2 in September, posting the lowest mark since February. However, aussie lovers will keep a close eye on the RBA’s policy decision tomorrow where forecasts are for the rates to remain steady at 1.5%.
The kiwi also pulled back by 0.28% to 0.7185 ahead of coalition talks to form a government in New Zealand that are said to begin this week. According to media, the kingmaker First Party will hold separate discussions with the National and the Labour Party.
Regarding commodities, oil prices followed a downtrend with WTI crude retreating by 0.10% to $51.62 per barrel and Brent declining by 0.23% to $56.66. Gold prices increased by 0.49% to $1,272.50 per ounce on the back of a stronger dollar.
Later in the day, PMI readings are expected to be released from the US, the UK, and the eurozone, while unemployment rate figures out of the eurozone will also be in focus.