The Dollar Index (DXY00) rose +0.39% to its 1.5-week high today. The dollar is rising today amid weakness in the yen, which fell to a 9.75-month low on concerns that the Japanese government will support a stimulus package that would substantially increase Japan’s debt burden. Today’s US trade news also supported the dollar after the August trade deficit narrowed more than expected.
US MBA mortgage applications fell -5.2% in the week ending November 14, with the mortgage purchase subindex down -2.3% and the refinance subindex down -7.3%. The average 30-year fixed-rate mortgage increased +3 bps to 6.37% from 6.34% the previous week.
The US trade deficit in August narrowed to -$59.6 billion from -$78.2 billion in July, below expectations of -$60.4 billion.
Markets are pricing in a 47% chance that the FOMC will reduce the fed funds target range by 25 bps at the next FOMC meeting on December 9-10.
EUR/USD (^EURUSD) is down -0.23% today to a 1-week low. The current strength of the dollar is weighing on the euro. Losses in the euro are limited after an Axios report said the Trump administration has been secretly working with Russia to draft a new plan to end the war in Ukraine.
Central bank divergence also supports the euro as the ECB is seen as having largely ended its rate cutting cycle, while the Federal Reserve is expected to cut rates several more times by the end of 2026.
Swaps are pricing in a 4% chance that the ECB will cut rates by -25 basis points at the December 18 policy meeting.
USD/JPY (^USDJPY) is up +0.68% today. The yen fell to a 9.75-month low against the dollar today as dovish comments from Goushi Kataoka, a panelist who advises Japanese Prime Minister Takaichi, weighed on the yen when he said the BOJ is unlikely to raise interest rates again before March. Losses in the yen accelerated amid concerns about Japan’s debt burden as Kataoka said a supplementary budget of about 20 trillion yen ($129 billion) will be needed this fiscal year to boost domestic demand, much larger than the 13.9 trillion yen package compiled a year ago.
Today’s Japanese economic news supported the yen after September core machine orders posted their biggest increase in 6 months. Additionally, higher Japanese government bond yields support the yen after the 10-year JGB yield hit a 17-year high of 1.781% today.