Forex Today: US Dollar stabilizes as bond yields recover ahead of FOMC Minutes

Here is what you need to know on Wednesday, October 7:

The US Dollar (USD) Index stays in positive territory near 102.00 in the European morning on Wednesday after closing in negative territory on Tuesday. Later in the American session, the Federal Reserve (Fed) will publish the minutes of the September policy meeting and the US Treasury will hold a 10-year note auction.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Euro.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.30%	0.21%	0.09%	0.09%	0.18%	0.29%	0.11%
EUR	-0.30%		-0.09%	-0.16%	-0.22%	-0.12%	-0.01%	-0.20%
GBP	-0.21%	0.09%		-0.08%	-0.12%	-0.02%	0.09%	-0.08%
JPY	-0.09%	0.16%	0.08%		-0.03%	0.07%	0.16%	-0.00%
CAD	-0.09%	0.22%	0.12%	0.03%		0.10%	0.21%	0.04%
AUD	-0.18%	0.12%	0.02%	-0.07%	-0.10%		0.11%	-0.06%
NZD	-0.29%	0.01%	-0.09%	-0.16%	-0.21%	-0.11%		-0.16%
CHF	-0.11%	0.20%	0.08%	0.00%	-0.04%	0.06%	0.16%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

The benchmark 10-year T-bond yield corrected lower on Tuesday and caused the USD to weaken against its major rivals. Early Wednesday, the 10-year yield regains its traction and holds above 5.3%, supporting the USD. In the meantime, US stock index futures lose between 0.1% and 0.2% to start the European session, reflecting a cautious market stance.

US long-end under pressure as Danske Bank flags risk of 6% yields

Analysts at Danske Bank note that “the pressure is on the long end of the US Treasury curve given not only supply of Treasuries but also from the hyperscalers.” Against this backdrop, they warn that “we do see the risk of 10Y and 30Y Treasuries hitting 6% as investors demand a higher premium for the long end,” highlighting growing concerns over term premia at the back end of the curve.

US Vice President (VP) JD Vance said that Iran must reduce nuclear enrichment capacity to satisfy US demands and end the countries’ seven-month war, Reuters reported late Tuesday. Vance added that Washington retained open to an agreement but would require concrete Iranian nuclear concessions. At the same time, the Saudi-led coalition in Yemen said that it intercepted and destroyed a ballistic missile launched by the Houthi group toward Khamis Mushait in southwestern Saudi Arabia. After rising about 1% on Tuesday, crude Oil prices hold steady midweek, with the barrel of West Texas Intermediate (WTI) trading little changed on the day, at around $89.50.

The data from Germany showed earlier in the day that Industrial Production increased by 2% on a monthly basis in August. This print followed the 1.2% decrease recorded in July and came in better than the market expectation of 0.5%. Nevertheless, the Euro (EUR) failed to benefit from this data and EUR/USD was last seen losing 0.3% on the day at 1.1225, pressured by France's debt issues and the political turmoil in Spain.

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) announced on Wednesday that it raised the benchmark Repo Rate by 25 basis points (bps) to 5.50% from 5.25% following the conclusion of the October monetary policy meeting. This decision came in line with the market expectation and didn't allow the Indian Rupee (INR) to gather strength. As of writing, USD/INR was trading at its highest level since late May at 96.70, rising about 0.3% on the day.

USD/JPY continues to edge higher and trades above 158.00 in the European session on Wednesday after posting marginal gains for two consecutive days.

GBP/USD fails to build on Tuesday's recovery gains and trades in the red at around 1.3250 early Wednesday.

Gold turns south as US T-bond yields rebound and trades below $4,150, losing about 0.7% on the day.

TD Securities analysts note that “weaker data, decreasing rate hike odds, a continued bid from discretionary traders, ETFs, and central banks have been enough to see gold hold firm in the face of surging real rates,” underscoring the depth and breadth of current demand supporting the market.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact the US Dollar?

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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