With the U.S. Dollar Index below 102, TD Securities strategists see U.S. stocks’ performance against overseas markets as a key test for further dollar weakness, FXStreet reported Oct. 20.
A TTMZero estimate carried by MarketScreener placed the index at 101.69 at 3:49 p.m. ET on Oct. 20. The reading was a market snapshot, not a daily close. ICE says the index measures the dollar against a basket of six currencies.
The reported TD Securities view points to two possible conditions for a lasting decline: U.S. shares trailing foreign stocks, or clearer evidence that the Federal Reserve is nearing the end of its rate increases. FXStreet said the strategists believe the dollar’s recent rally may have peaked but see too few immediate triggers for a selloff. They expect weakness to develop gradually for now and consider a pullback after the Nov. 3 midterm election more likely.
U.S. Treasury data showed yields moving in different directions on Oct. 20. The 10-year yield fell to 5.12% from 5.15% on Oct. 19, while the two-year yield rose to 4.79% from 4.77%. Treasury says its daily figures are based on indicative quotations obtained near 3:30 p.m. ET.
The Fed raised its target rate by 0.25 percentage point to a range of 3.75% to 4.00% on Sept. 16. The Bureau of Labor Statistics said seasonally adjusted consumer prices rose 0.6% in September from August. Prices were 3.7% higher than a year earlier before seasonal adjustment. Those figures provide context for the rate path at the center of the reported forecast.
Stock losses could also support the dollar under a different scenario. In an earlier assessment of stock losses and dollar demand, Brown Brothers Harriman strategist Elias Haddad said a technology share selloff could draw foreign investors toward Treasury securities.
The Fed is scheduled to announce its next rate decision at 2 p.m. ET on Oct. 28, ahead of the Nov. 3 election. The next U.S. consumer price report is due at 8:30 a.m. ET on Nov. 10.
