FX Daily analysis
Dollar firms broadly as real gains out of franc and real split the tape
The dollar index added +0.22% as the franc and the real moved in opposite directions for different reasons. USD/BRL jumped +6.37% on the day, a 7.35 standard deviation move, while USD/CHF rose +0.96% to a 2.12 standard deviation session.
Takeaways
- USD/BRL moved 7.35 standard deviations on the day, the largest dislocation in the pack by a wide margin.
- The dollar index rose +0.22% on the day but is flat on the week at +0.05%, so the month's gain of +1.05% owes little to today.
- USD/CHF closed at 2.12 standard deviations even as the US 2-year yield rose only +4.0bp, a move the correlation history does not explain.
- EUR/USD sits 0.14% above its 52-week low after a fifth straight session of losses on both the day and the week.
The dollar
The dollar index closed at 102.03, up +0.22% on the day. The week is closer to flat, +0.05%, and the month shows +1.05%. The index sits 0.54% below its one-month high of 102.58 and 0.63 standard deviations above its recent norm for a daily move, a session firm but not extreme by its own volatility.
The US 2-year yield rose +4.0bp to 4.69%, still down 16bp over the month. The 10-year added +4.0bp to 5.00%. The dollar index carries a 0.43 correlation with the 2-year over 60 sessions, among the higher readings in the pack, so today's front-end back-up sits alongside the dollar's advance rather than against it.
G10 majors
USD/CHF led the G10 majors, up +0.96% to 0.82768, a 2.12 standard deviation session and the largest in the main moves list after BRL. The pair sits 0.77% below its one-month high of 0.83409 and has now erased its monthly loss, at -0.04% over 21 sessions versus +0.48% on the week. The correlation to the 2-year is -0.14, so the move ran against the direction the recent relationship would suggest.
EUR/USD fell -0.41% to 1.11757, extending a -0.44% week and a -1.75% month. The pair closed 0.14% above its 52-week low of 1.11602 and 0.70% below its one-month high. The ECB's deposit rate stands at 2.50% as of today, last moved +25bp on September 16, a gap of -150bp to the top of the Fed's range. The EUR/USD correlation to the 2-year is only 0.12, among the weakest of the majors.
USD/JPY rose +0.67% to 157.548, a 1.37 standard deviation session, though the pair remains down -0.16% on the week and -0.80% on the month. It sits 0.62% below its one-month high and 0.33% below its 50-day average. The BoJ rate is 1.25% as of October 20, last raised +25bp on September 24, a gap of -275bp to the Fed. GBP/USD fell -0.45% to 1.33438 even as it holds a positive month at +1.01%; the BoE's rate is 3.75% as of October 19, unchanged since a -25bp cut on December 18 last year, a gap of just -25bp to the Fed, the narrowest differential among the majors shown.
Emerging markets
USD/BRL was the standout print anywhere in the pack, up +6.37% on the day and +6.09% on the week, closing at its one-month high of 5.3716 and 4.07% below its 52-week high. The move sits at 7.35 standard deviations, by far the largest reading in the file. Brazil's policy rate is 13.75% as of October 20, last cut -25bp on September 17, leaving a gap of +975bp to the top of the Fed's range, the widest differential in the pack.
Asia and the rest of EMEA were calmer by comparison. USD/CNY fell -0.28% to 6.6593, a fresh one-month and 52-week low, with the yuan up +0.78% on the month against the dollar. USD/KRW slipped -0.11% on the day and is down -3.13% on the month, the won the strongest G10-adjacent EM currency over that window at +3.23% versus the dollar. USD/MXN fell -0.89% on the day but remains up +4.60% on the month, the peso the weakest major EM currency over 21 sessions at -4.40%. USD/INR rose +0.49% to 95.175, with the rupee down -1.03% on the month after the RBI's +25bp move on October 7 took its rate to 5.50%, a +150bp gap to the Fed. USD/ZAR added +0.91% and USD/TRY was little changed at +0.08%, both currencies still negative against the dollar on the month.
Rate differentials and central banks
The session's defining move, USD/BRL, carries only a 0.08 correlation to the US 2-year over 60 sessions, so the front end offers no read on the jump. Brazil's +975bp differential to the Fed is the widest in the pack and has been there for some time; today's move is a size the policy gap alone does not explain, and the data here does not support attributing it to a single cause.
The dollar's broader firmness aligns more clearly with rates: the index's 0.43 correlation to the 2-year is the highest of any instrument in the pack, and both the yield and the index rose together today. EUR/USD, GBP/USD and NZD/USD all carry correlations near zero (0.12, 0.02 and 0.01 respectively), so their softness came without support from the front-end move. USD/CHF stands out for having risen sharply, +0.96%, despite a -0.14 correlation to the 2-year, a session that ran against its recent pattern.
Among the EM central banks, the RBI's October 7 hike to 5.50% and the RBA's September 30 hike to 4.60% were the most recent moves in the pack, both lifting their differentials to the Fed to +150bp and +60bp. The CBRT's rate remains at 37.00% as of October 16, unchanged since a -100bp cut in January, keeping Turkey's differential at +3300bp, the widest of any pair shown against the Fed's range.
Levels that matter
- USD/BRL: closed 5.3716, at its one-month high, 4.07% below the 52-week high of 5.59 and 4.88% above the 50-day average of 5.10952.
- USD/CHF: closed 0.82768, 0.77% below the one-month high of 0.83409 and 0.34% above the 50-day average of 0.82488.
- USD/CNY: closed 6.6593, at both its one-month and 52-week low, 0.61% below the 50-day average of 6.69987.
- USD/MXN: closed 18.555, 0.89% below the one-month high of 18.72078 and 3.16% above the one-month low of 17.96919.
- EUR/USD: closed 1.11757, 0.14% above the 52-week low of 1.11602 and 0.70% below the one-month high of 1.12535.
- USD/JPY: closed 157.548, 0.62% below the one-month high of 158.52299 and 0.33% below the 50-day average of 157.03202.
- GBP/USD: closed 1.33438, 0.45% below the one-month high of 1.34039 and 0.09% below the 50-day average of 1.33312.
- USD/ZAR: closed 16.6301, 0.06% below the one-month high of 16.64052 and 1.39% above the 50-day average of 16.39853.
Every pair
| Pair | Last | Day | Week | Month | Year to date | Policy rate |
|---|---|---|---|---|---|---|
| The dollar | ||||||
| Dollar indexindex | 102.03 | +0.22% | +0.05% | +1.05% | +3.67% | n/a |
| G10 majors | ||||||
| EUR/USDUSD per EUR | 1.1176 | −0.41% | −0.44% | −1.75% | −4.89% | 2.50%ECB, −150bp vs Fed |
| USD/JPYJPY per USD | 157.55 | +0.67% | −0.16% | −0.80% | +0.52% | 1.25%BoJ, −275bp vs Fed |
| GBP/USDUSD per GBP | 1.3344 | −0.45% | +0.06% | +1.01% | −0.96% | 3.75%BoE, −25bp vs Fed |
| USD/CHFCHF per USD | 0.8277 | +0.96% | +0.48% | −0.04% | +4.50% | 0.00%SNB, −400bp vs Fed |
| USD/CADCAD per USD | 1.4012 | +0.07% | −0.76% | −0.95% | +2.16% | 2.25%BoC, −175bp vs Fed |
| AUD/USDUSD per AUD | 0.7018 | −0.03% | +0.66% | +0.14% | +5.09% | 4.60%RBA, +60bp vs Fed |
| NZD/USDUSD per NZD | 0.5687 | +0.03% | +0.49% | +0.53% | −1.24% | 2.75%RBNZ, −125bp vs Fed |
| Emerging markets | ||||||
| USD/CNYCNY per USD | 6.6593 | −0.28% | −0.47% | −0.77% | −4.81% | 3.00%PBoC, −100bp vs Fed |
| USD/MXNMXN per USD | 18.5550 | −0.89% | +0.62% | +4.60% | +3.17% | 6.50%Banxico, +250bp vs Fed |
| USD/BRLBRL per USD | 5.3716 | +6.37% | +6.09% | +3.49% | −2.63% | 13.75%BCB, +975bp vs Fed |
| USD/INRINR per USD | 95.175 | +0.49% | +0.21% | −1.03% | +5.79% | 5.50%RBI, +150bp vs Fed |
| USD/KRWKRW per USD | 1,324.54 | −0.11% | −0.67% | −3.13% | −8.25% | 3.00%BoK, −100bp vs Fed |
| USD/ZARZAR per USD | 16.6301 | +0.91% | +1.06% | +1.22% | +0.47% | 7.25%SARB, +325bp vs Fed |
| USD/TRYTRY per USD | 49.7727 | +0.08% | +0.50% | +1.68% | +15.77% | 37.00%CBRT, +3,300bp vs Fed |
Moves as each pair is quoted: a rise in USD/JPY is a stronger dollar, a rise in EUR/USD a stronger euro. Policy rates as the analysis had them on file, against the top of the Fed's range.
Sources
Exchange rates and the dollar index at the session close from Yahoo Finance; the Fed and ECB rates and Treasury yields from FRED. Every figure in this analysis was checked against the session's verified fact pack. The text was drafted with a language model from that fact pack; the methodology explains how.
For information only. Not investment advice.