The dollar index (DXY00) on Tuesday fell by -0.23% and posted a 1-week low. A rally in stocks on Tuesday curbed the liquidity demand for the dollar. The dollar was also under pressure Tuesday after comments from Atlanta Fed President Bostic bolstered speculation the Fed is heading toward a pause in interest rate hikes. Losses in the dollar were limited as the ongoing turmoil in the Middle East is boosting some safe-haven demand for the dollar.
Dovish comments Tuesday from Atlanta Fed President Bostic were bearish for the dollar when he said, "I don't think we need to increase interest rates anymore, and I think that our policy rate is at a sufficiently restrictive position to get inflation down to 2%."
EUR/USD (^EURUSD) on Tuesday rose by +0.24% and posted a 2-week high. Dollar weakness sparked some short covering in the euro. EUR/USD extended its gains on hawkish comments from ECB Governing Council member Holzmann, who said supply shocks could cause the ECB to raise interest rates further.
Tuesday’s Eurozone economic news supported the euro after Italy Aug industrial production unexpectedly rose +0.2% m/m, stronger than expectations of -0.3% m/m.
ECB Governing Council member Holzmann said, "Inflation needs to be kept under control," and supply shocks could force the ECB to raise interest rates "one or two more times."
USD/JPY (^USDJPY) on Tuesday rose by +0.13%. The yen on Tuesday moved lower on reduced safe-haven demand after the Nikkei Stock Index rallied more than +2%. A decline in Japanese government bond yields also weighed on the yen after the 10-year JGB bond yield fell to a 1-week low of 0.767%. In addition, a fall in the Japan Sep eco watchers outlook survey to an 8-month low undercut the yen. The yen recovered from its worst levels after Kyodo reported the BOJ at its Oct 30-31 policy meeting is considering lifting its fiscal 2023 inflation forecast to near 3.0% from 2.5% announced in July.
The Japan Sep eco watchers outlook survey fell -1.9 to an 8-month low of 49.5, weaker than expectations of 51.3.
December gold (GCZ3) on Tuesday closed +11.00 (+0.59%), and Dec silver (SIZ23) closed +0.029 (+0.13%). Precious metals prices on Tuesday moved higher for the third consecutive session, with gold climbing to a 1-week high. A weaker dollar on Tuesday gave metals prices a boost. Also, the fall in the 10-year T-note yield to a 1-week low was bullish for precious metals. In addition, dovish comments from Atlanta Fed President Bostic were bullish for precious metals when he said, "I don't think we need to increase interest rates anymore.” Finally, gold received a boost in demand as an inflation hedge after the IMF raised its global 2024 inflation forecast to 5.8% from a July forecast of 5.2%.
On the negative side, strength in stocks on Tuesday curbed the safe-haven demand for precious metals. Also, hawkish comments Tuesday from ECB Governing Council member Holzmann weighed on precious metals when he said supply shocks may force the ECB to raise interest rates again. In addition, long liquidation pressures are weighing on gold after long gold holdings in ETFs fell to a 3-1/2 year low Monday.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
