Dollar Index at 101.64 Ahead of Week Packed With Central Bank Decisions

Key Facts

The dollar index traded in a narrow range, at a slightly weaker 101.64 points on October 26, according to Reuters, as markets awaited decisions from major central banks this week. In EL7 data, the index closed at 101.84 points that day, after 101.475 points on October 25 and 101.648 points on October 23. The difference between the Reuters report and the closing data provided reflects the index’s intraday movement versus its recorded closing value. The moves came amid subdued currency trading, not a sharp dollar rally. Attention is turning to what central banks say about their upcoming meetings, as forward guidance could carry more weight than the decisions expected this week.

Falling U.S. Treasury yields weighed on the dollar, with the 10-year yield down to 4.974% and the 30-year yield at 5.299%; both were near their lowest levels in about a month, according to Reuters. Ray Attrill of National Australia Bank said the decline in yields and narrowing yield spreads with Group of Ten economies had eased some pressure on the U.S. currency. He added: "I think that has taken a little bit of the edge off the pressure on the U.S. dollar." This factor puts currency moves in the context of yield comparisons between the United States and major economies. Oil prices also fell on Monday after Reuters reported that Qatari mediators were in Tehran as part of efforts, coordinated with the United States, to ease regional tensions.

The dollar had come under selling pressure during the previous week amid a technology-led selloff, according to Reuters. In the previous Friday’s session, Brent crude rose 3.1% to $116.72 a barrel, its highest level since June 2022, according to the Associated Press. In the same session, the U.S. 10-year Treasury yield rose to 4.99% from 4.96% at Thursday’s close. The moves highlight that markets entered decision week after mixed shifts in oil and yields, while the dollar remained under selling pressure. The report did not specify how much each individual move contributed to currency changes.

Markets expected the Federal Reserve, European Central Bank and Bank of Japan to leave interest rates unchanged, while pricing in the possibility of rate hikes by the Bank of Canada and Reserve Bank of New Zealand, according to Reuters. The list of meetings expected this week therefore includes Canada and New Zealand, alongside the three banks expected to hold rates. The Fed meets on October 27 and 28, while the European Central Bank’s Governing Council meets on October 28 and 29, with a news conference scheduled for the second day. The Bank of Canada will announce its decision on October 28 at 09:45 Eastern time and publish its monetary policy report at the same time. Investors are focused on central banks’ assessments of the policy path at subsequent meetings, signals Reuters said could be a more important market driver.

The Fed meeting follows its September decision to raise the target range for interest rates by a quarter of a percentage point to 3.75%–4%. The bank said in its statement that inflation remained elevated and that its move supported a timely return to its 2% target. That makes upcoming U.S. price data part of the picture investors will assess alongside rate decisions. The data include the October consumer confidence report, the personal consumption expenditures price index and weekly jobless claims. Markets expected the PCE index to show an annual increase of 3.7% in September, compared with the Fed’s 2% inflation target.

Among major currencies, the euro rose 0.16% to $1.122, benefiting from markets’ relief that France avoided a Moody’s credit rating downgrade despite social unrest, according to Reuters. Sterling rose 0.1% to $1.3385. The Bank of England will announce its next decision on November 5, putting it outside the list of decisions for the week of October 26. China announced its loan prime rates on October 20, according to the correction in the coverage evidence. These dates set clear boundaries for the monetary events markets are tracking this week, while attention then turns to U.S. data and central bank comments on their next steps.