Dollar Strengthens as Aussie Outperforms G10 Peers

The US Dollar strengthened on Monday, weighing on most G10 currencies, except for the Australian Dollar, which managed to gain against the Greenback. The move came amid light currency-specific news and a mixed ISM Services report. The New Zealand Dollar, Euro, and Swiss Franc were the weakest performers among G10 currencies.

The Japanese Yen initially gained ground following constructive comments from Prime Minister Takaichi, who emphasized fiscal discipline. However, the Yen later faced pressure after a Bloomberg report revealed that Japan’s Government Pension Investment Fund (GPIF) did not discuss allocation changes at its September meeting. This dashed hopes that the GPIF might adjust its Japanese government bond allocation to the upper end of its 19-31% band.

The Euro came under pressure due to fiscal and political concerns. In France, unions called for a nationwide strike on November 5th, while Spanish Prime Minister announced a snap election. Meanwhile, the Brazilian Real surged after Jair Bolsonaro secured a narrow lead in the first-round presidential election over President Lula da Silva. The Real also benefited from a sharp decline in Brazil interest rate futures.

Bolsonaro’s Liberal Party also led in congressional and regional elections, with his campaign focusing on crime, corruption, the economy, and sovereignty. Bolsonaro favors closer ties with the US, while Lula advocates for stronger state-led social and industrial policies. A run-off election is scheduled for October 25th.