The dollar has returned to a strong position. The asset is currently positioned close to its session highs as the European morning progresses. The ongoing French crisis remains unresolved, and the policy mix proposed by the incoming leader of the LDP, who is set to become prime minister, continues to exert pressure on the yen. The US government continues to be in a state of closure, with the White House conveying inconsistent messages regarding its readiness to engage in negotiations with Democratic Party leaders. The Antipodeans rank as the weakest currencies within the G10, particularly in light of New Zealand’s expected rate cut scheduled for tomorrow. In line with expectations, within a strong US dollar context, the Canadian dollar performs comparatively well, and as of today, it leads among the G10 currencies.

The U.S. dollar is currently at its highest point in almost seven months against the Japanese yen, approaching the JPY151.00 mark. The euro is currently positioned at approximately $1.1660. The anticipated decline in German factory orders is negatively impacting the single currency. The majority of emerging market currencies are experiencing depreciation, with central European currencies at the forefront of this trend. The holidays resulted in the closure of the Hong Kong, mainland China, and South Korean markets. Most of the other large equity markets in the region declined, whereas Australia experienced an increase. Europe’s Stoxx 600 halted its six-day rally yesterday and is showing slight weakness today. US index futures remain relatively stable. The stability of Japanese bonds today was supported by a robust 30-year JGB auction.

European benchmark 10-year yields are generally 1-2 basis points firmer, while the 10-year US Treasury yield is marginally higher at approximately 4.16%. Today, multiple Fed officials are scheduled to speak, including Governor Bowman, who has suggested the necessity for more rapid rate cuts. The United States is set to issue $90 billion in six-week bills today, alongside $58 billion in three-year notes. Gold achieved a new record high close to $3977.50; however, profit-taking has led to a reduction in earlier gains. November WTI is currently trading within the range established yesterday, approximately between $61 and $62.15.

The North American market failed to sustain the dollar’s gains achieved in Asia and Europe, influenced by political developments in Japan and France. The Dollar Index peaked at nearly 98.50 in Europe yesterday before pulling back to around 98.00 in North America. DXY is exhibiting strong performance today, as it approaches yesterday’s peak during European trading hours. A breakout above 98.60 may lead to a target range of 98.80-85 subsequently. The dollar’s appreciation appears to be primarily influenced by political events occurring in Japan and the eurozone. President Trump is threatening to terminate thousands of federal government employees; however, unions representing these workers have pursued a court injunction to prevent this action, while also indicating a willingness to engage in discussions with Democrats regarding health care subsidies.