Market Watch: Dollar Retreat Extended

Financial and commodity markets analytics

The recent depreciation of the US dollar, which began last week, continued today, with the yen leading the downward trend. The Dollar Index is currently down by approximately 0.35%, following a 1.8% decline last week. Notably, it has fallen below the 200-day moving average for the first time since late August. Similar to the previous week, the Canadian dollar exhibits the weakest performance. Concurrently, most emerging market currencies are experiencing gains.

Hong Kong and mainland shares are leading the regional market surge, while Europe's Stoxx 600 is modestly advancing after a 2.8% rally last week. In the United States, index futures are slightly firmer.

Gold is trading with a bearish bias today, retreating from its pre-weekend levels near $1993.45 to $1973.45. Meanwhile, speculation about OPEC+ considering additional or prolonged production cuts to bolster prices is contributing to the January WTI contract building on its pre-weekend recovery, reaching a three-day high at around $76.80.

Asia Pacific
Turning to the Asia Pacific region, Chinese banks have maintained their loan prime rates at 3.45% for the one-year rate and 4.20% for the five-year rate, aligning with expectations.
The dollar, having tested the month's low near JPY149.20, has now dropped to JPY148.20, marking its lowest point since October 10.
Notably, the Australian dollar closed last week at $0.6515, its highest since August 10, and has surpassed last week's highs, with an initial target approaching $0.6565.

In Europe, Eurostat's confirmation of a 0.1% contraction in the eurozone economy for Q3 did not significantly impact the market, given the positive news of a 0.4% rise in construction output for September following a 1.1% decline in August. Looking ahead, the calendar is relatively light until Thursday's preliminary November PMI.

Both the euro and sterling posted outside up days before the weekend, with the euro settling at its highest level since August 30, and sterling reaching $1.2510, maintaining levels above the 200-day moving average.

In the Americas, the US is in a holiday-shortened week, with Richmond Fed President Barkin scheduled to speak. Barkin, a non-voting member of the FOMC this year, will gain voting status next year.

Canada is set to report October CPI, and the government will provide its fall economic update. Notably, before the weekend, Canada reported foreign investors selling a net C$15.1 billion of Canadian bonds and stocks in September, marking the first consecutive divestment since June-July 2020.
The US dollar traded within Thursday's range ahead of the weekend, with initial support anticipated near last week's low.