Dollar Holds at 102 as US Holiday Thins Trade, Yields Firm From Friday

The US Dollar Index trades at 102.00, up 0.08% in live dealing at 04:00 Sydney time (~14:00 New York), with today's session still open. Moves are modest and mixed: the dollar is firmer against the yen (USD/JPY 158.31, +0.26%) and the Canadian dollar (USD/CAD 1.4253, +0.20%), softer against the Australian dollar (AUD/USD 0.6982, +0.35%), New Zealand dollar (NZD/USD 0.5612, +0.15%) and Swiss franc (USD/CHF 0.8301, -0.19%), and little changed against the euro (EUR/USD 1.1201, -0.09%) and sterling (GBP/USD 1.3231, +0.01%). Liquidity is thinner than usual: the US bond market, Canada and Japan are all closed for holidays today.

The Fed's funds target sits at 3.75-4.00% after a 25bp hike on September 16 — the first hike since 2023, passed by a 12-0 vote — with most officials projecting at least one more hike this year; the live debate is further hikes, not cuts. Treasury yields moved modestly in Friday's full session, the last one before today's US bond-market holiday, so these reflect normal liquidity rather than today's holiday-thinned trade: the 10-year added 1.3bp to 5.244%, the 5-year 3.0bp to 5.021% and the 3-month 1.4bp to 4.057%, while the 30-year eased 0.6bp to 5.600%. September payrolls rose just 29,000 against an 84,000 forecast, with unemployment at 4.2%, and the University of Michigan's October sentiment gauge fell to a five-month low of 46.3 with one-year inflation expectations up to 4.7%. Fed Governor Christopher Waller said further hikes are likely needed but need not come at consecutive meetings.

EUR/USD: 1.1201 (-0.09%), stabilizing after sliding to a 17-month low near 1.1162 on October 5, with France's fiscal crisis — the OAT-Bund spread back near 134bp after spiking to ~150bp on October 2, its widest since the 2011-12 debt crisis — still dominant despite ECB President Christine Lagarde reiterating the ECB 'has instruments to counter unwarranted, disorderly market dynamics'. GBP/USD: 1.3231 (+0.01%), steady after Friday's bounce off three-month lows near 1.32, as dollar softness offsets elevated UK gilt yields and pre-Budget fiscal concerns. USD/JPY: 158.31 (+0.26%), extending a fourth straight weekly advance on the wide US-Japan rate gap (Fed 3.75-4.00% vs BoJ 1.25%); Tokyo is closed today for the Sports Day holiday. USD/CAD: 1.4253 (+0.20%), near Friday's highs after Canadian employment fell 68,000 in September — a second straight monthly decline — pushing unemployment to 6.5% and denting the case for an October Bank of Canada hike; Canadian markets are closed today for Thanksgiving.

GBP/USD trades at 1.3231, flat on the day (+0.01%) in thin holiday dealing, holding Friday's bounce off three-month lows near 1.32 to 1.3233-1.3250. That bounce came as the University of Michigan's preliminary October sentiment index fell to a five-month low of 46.3, with one-year inflation expectations rising to 4.7%, and Fed Governor Christopher Waller said further hikes are likely needed but need not come at consecutive meetings — both dollar-softening. Capping sterling: 30-year gilt yields above 6%, highest since early 1998, and renewed fiscal concern ahead of the Budget. BoE Governor Andrew Bailey, speaking on October 8, stressed that fiscal policy must be credible and directed at stability, and be seen as such by markets. Today's calendar brings Deputy Governor Breeden and MPC member Mann speaking.

US bond markets are closed today for a holiday, thinning liquidity even though FX keeps trading. Canada's TSX and Montreal Exchange are also shut for Thanksgiving, reopening Tuesday. Tokyo markets are closed for the Sports Day holiday. On the calendar: BoE Deputy Governor for Financial Stability Sarah Breeden speaks (digital assets and tokenization, plus the UK's upcoming G20 presidency), followed by BoE external MPC member Catherine Mann on a NABE Annual Meeting panel titled 'What's Driving Inflation? Energy, Tariffs, and Exchange Rates.' No major UK data releases are due Monday; the next ONS prints are the GDP monthly estimate on October 15 and the labour market overview on October 20.