DXY Holds Near 102 as Hawkish Fed Minutes Offset Dipping Yields

The US Dollar Index sits at 102.02, up a bare 0.01% on the day, in a live reading taken roughly three hours ahead of Thursday's New York close — the session is still open. That holds a Thursday tape where September FOMC minutes, showing most policymakers favored another hike by year-end, kept the dollar broadly supported, overriding an earlier intraday dip tied to Fed Governor Christopher Waller's dovish-leaning remarks about a possible October pause. Waller later struck a firmer note, saying more hikes are needed to get inflation down faster while flagging there is 'flexibility' about the pace. Equities traded softer alongside the steady dollar: the S&P 500 fell 0.50% and the Nasdaq dropped 1.19%, while the VIX rose 1.86% to 15.36.

The Fed funds target sits at 3.75-4.00% after a 25bp hike on September 16 — the first hike since 2023, passed 12-0 — with most officials projecting at least one more hike this year; the live question is further hikes, not cuts. Thursday's September FOMC minutes showed most policymakers favoring another hike by year-end. Treasury yields moved modestly: the 10-year eased 1.4bp to 5.263% and the 30-year eased 3.5bp to 5.626%, while the short end ticked up — the 5-year added 0.6bp to 5.027% and the 3-month rose 0.8bp to 4.045%. Fed Governor Christopher Waller said more hikes are needed to get inflation down faster, while noting there is 'flexibility' about the pace.

EUR/USD trades at 1.1196, essentially flat, holding just above its 17-month low after a Thursday ECB account confirmed the September 25bp hike (deposit rate to 2.50%) and showed some Governing Council members favoring further tightening. GBP/USD sits at 1.3214, also roughly flat, after sterling eased Thursday as hawkish FOMC minutes kept the dollar broadly bid, trimming an earlier bounce tied to Waller's dovish-leaning comments; the pair is down about 2.6% over the trailing month. USD/JPY is at 158.01, down 0.05% (full read below). USD/CAD trades at 1.4242, down 0.11%, holding near multi-week highs as a firm Fed outlook meets a sharp oil jump — WTI up 2.33% to $90.97 and Brent up 3.12% to $103.33 — on renewed Iran tensions.

USD/JPY sits at 158.01, down 0.05% on the day. In Thursday's session the yen stayed under pressure even after Japan's August current-account surplus beat forecasts at ¥4.062tn versus a ¥3,194bn forecast — Trading Economics attributed the softness to the persistently wide US-Japan yield differential (roughly 250-275bp), which keeps favoring the dollar over Japan's comparatively low rates. The prior session (Oct 7) spiked to 158.50 before reversing to close near 158.06, per UOB strategists. BoJ Governor Ueda's October 6 speech said only that officials 'intend to continue raising the policy interest rate... in response to developments in economic activity, prices, and financial conditions,' giving markets no fresh signal. UOB flags the pair range-bound between roughly 156.35 and 158.70. Today's calendar brings Japan's preliminary Machine Tool Orders y/y, previous reading 64.7%.

On today's calendar: Japan's preliminary Machine Tool Orders y/y at 17:00 (previous 64.7%); Swiss SECO Consumer Climate at 18:00 (forecast -32, previous -33); Italian Industrial Production m/m at 19:00 (forecast 0.0%, previous 0.7%); an ECOFIN meeting at 20:15, which ECB President Lagarde is attending in Luxembourg on a market-integration and bank-sector-competitiveness package; and, at 23:30, Canada's Employment Change (forecast 6.3K versus a prior -41.7K) and Unemployment Rate (forecast 6.5% versus 6.4% prior). Kansas City Fed President Jeffrey Schmid is also due to speak. Tomorrow, not today: preliminary University of Michigan Consumer Sentiment (forecast 47.5, previous 47.8) and Inflation Expectations (previous 4.6%) at 01:00, followed by FOMC Member Collins speaking at 07:00.