Dollar Extends Gains Amid Risk-Averse Market Conditions

The US dollar is extending its gains as bond and equity sell-offs continue. Market conditions remain risk-averse, with yields higher and stocks lower. The recent Middle East hostilities have contributed to these market fluctuations.

October set a new contract high for oil prices, reaching $92.30 before steadying. Higher oil prices and rising yields are weighing on equity markets, with Asia Pacific equities falling by nearly 3%, South Korea's Kospi down by almost 4%, China's CSI 300 off by about 1.4%, and Taiwan's Taiex declining by nearly 1.7%.

The dollar is firming against most G10 currencies, with the exception of the yen. The BOJ Governor Ueda confirmed a rate hike, while a hawkish board member held out the possibility for a larger increase. Despite this, the yen remains weak, down around 1.4%, serving as a cautionary note to those expecting it to rally on a well-signaled BOJ hike.

The euro is approaching its lows from Friday and Monday, slightly below $1.1580, before extending losses to almost $1.1565 today. The five- and 20-day moving averages are set to cross tomorrow. The next downside target for the euro is in the $1.1520-30 area.