The dollar has experienced significant trading activity in recent days, currently consolidating within narrow ranges while exhibiting a slightly firmer bias today. US rates, which surged yesterday, are maintaining elevated levels throughout the Asia Pacific session and into the European morning. We believe the greenback has potential for further short-term corrective gains. In light of a robust 10-year JGB auction, the yen remains the weakest among the G10 currencies, while the dollar is attempting to regain a position above JPY156. The Australian dollar and Swiss franc are performing well and remain relatively stable. Most emerging market currencies are experiencing weakness, although a select few in the Asia Pacific region, such as the Chinese yuan, are holding steady despite the PBOC’s higher dollar fix.

In the Asia Pacific region, the only markets that experienced declines were those of China and India. South Korea’s Kospi outperformed the region with a notable 1.9% increase, driven by strong performances in the semiconductor and automotive sectors. Anticipation surrounding parliamentary approval for a reduced top tax rate on dividends, in conjunction with the upcoming budget, has positively influenced holding companies and financial stocks. Yesterday, Europe’s Stoxx 600 experienced a decline for the first time in six sessions; however, it is showing a modest increase today around midday. The S&P and Nasdaq futures are approximately 0.2%-0.3% higher. Benchmark 10-year yields show a slight increase in Europe, while the 10-year US Treasury yield remains stable around 4.08%-4.09%. Gold has declined by slightly over 1% following its inability to maintain the early upward momentum observed yesterday. The pre-weekend low around $4155 in the spot market could provide a level of support. January WTI is currently stabilising within the range established yesterday, fluctuating approximately between $59.10 and $59.65.

Following a decline over the last six sessions, the Dollar Index seems somewhat extended, with the rise in US yields appearing to provide support close to the November low around 99.00. The 99.50 area has been tested, with nearby resistance observed in the 99.60-70 range. This week, the US economic data schedule is more active as government data releases continue. Key points of interest today include the September JOLTS report and the November auto sales figures. Auto sales are expected to have rebounded from a 6.5% decline in October following the expiration of the EV tax incentives. However, the lacklustre ISM manufacturing report released yesterday did not hinder the development of a more robust dollar sentiment. The bearish steepening of the US curve (2-10-year) observed yesterday could have been influenced by the hedging associated with the investment grade issuance this week (estimated at ~$40 bln) and the increasing sentiment that Hassett will be nominated to succeed Chair Powell at the Federal Reserve. The curve stands at approximately 56 basis points. The incline has not been significantly sharper in approximately three months.

The euro experienced a minor pause just ahead of the mid-November peak near $1.1655 yesterday. Following a six-day rally and the stabilisation of the US two-year premium over Germany, the euro remains relatively unchanged, trading within a narrow range around $1.1600 and staying below $1.1620. Options totalling approximately 925 million euros at a price of $1.1625 are set to expire today. Initial support is identified around $1.1580. A move below $1.1550, where 4 billion euros in options are set to expire on Thursday, would be seen as disappointing. The eurozone announced that its unemployment rate for October increased slightly to 6.4%, up from 6.3%. The range has fluctuated between 6.2% and 6.4% since the conclusion of Q1 24. This represents the lower boundary observed since the establishment of monetary union. In a separate update, the eurozone has released the preliminary aggregate Consumer Price Index (CPI) for November. Following the release of CPI figures from the four largest member states at the end of last week, the impact appears minimal. The year-over-year headline rate has increased to 2.2% from 2.1%, while the core rate remains steady at 2.4%. The pricing observed in the swaps market aligns with the conclusion of the ECB’s easing cycle.

The dollar reached its highest point on November 20, just below JPY157.90, and yesterday saw a low around JPY154.65. This aligned with the (38.2%) retracement of the dollar’s upward movement that commenced on October 17. The increase in US rates yesterday appeared to support the dollar’s stabilisation in North America, allowing it to close above the 20-day moving average (~JPY155.25), a level it had breached for the first time since October 17. The recent back-to-back increase in the US 10-year yield marks a notable trend, with an 8 basis point rise being the most significant since the Federal Reserve’s cut in late October. The US two-year yield increased by nearly five basis points yesterday, marking the highest level in almost a month. The yield concluded at a seven-day peak close to 3.54%. The dollar has rebounded to test the JPY156 level during the European morning session. Resistance is observed in the JPY156.30-60 range. Options totalling approximately $885 million at JPY156 are set to expire today, alongside another batch amounting to $950 million at JPY156.50, which also has a today expiration.

Following a decline of approximately 0.90% last week, marking the largest drop in six months, the dollar showed signs of stabilisation yesterday after experiencing losses in the previous four sessions. The asset fluctuated within a narrow band of less than 25 pips around the previous week’s settlement, remaining within the range of approximately CAD1.3955 to CAD1.4000. It remains strong in Europe, approaching nearly CAD1.4015. There is a belief that the US dollar may have the potential to revisit the CAD1.4050 region. The Bank of Canada is scheduled to meet next week, and it appears unlikely that there will be any changes to policy, which may mitigate the effects of the economic data. The key focus this week is the employment report scheduled for release on Friday. In October, the overall jobs increased by 66.6k; however, full-time positions decreased by 18.5k, and the unemployment rate fell to 6.9% from 7.1%.