A Good Day for the Dollar but a Bad One for Equities
November 4, 2025
The dollar experience across-the-board appreciation overnight, rising on the weighted DXY basis past the 100.0 for the first time since the end of July and to its strongest such quote since May. Record highs against the Indian rupee elicited intervention support from the Reserve Bank of India, and Japanese Finance Minister Katayama expressed displeasure over the one-sided nature of recent yen trading and said officials are closely watching dollar/yen movement. Compared to Monday closing quotes, the dollar has advanced 0.8% against the kiwi, 0.7% versus the Mexican peso, 0.6% relative to the Australian dollar, South Korean won and sterling and 0.5% vis-a-vis the yen. Smaller dollar gains of 0.3%, 0.2% and 0.1% have been respectively made against the euro, loonie and Swiss franc.
The S&P 500, Nasdaq and Russell 2000 are each sporting losses of at least 1.0% in futures trading before the U.S. opening bell. Asian equity markets fell today by 2.4% in South Korea, 1.7% in Japan, 1.0% in Pakistan, and 0.8% in Hong Kong and Taiwan. Australia’s market dropped 0.9%, and the German and French exchanges are presently more than 1.0% in the red.
Prices for Bitcoin and oil have slumped 2.5% and 1.3%, while gold softened 0.5%, moving below the $4000 per ounce psychological threshold.
The 10-year British gilt yield is three basis points lower, but drops in comparable U.S., German, French, Italian and Spanish sovereign debt yields have been held so far to a basis point.
The market’s latest bout of risk aversion reflects lessening confidence in additional near-term interest rate cuts in many countries plus other uncertainties related to policy matters.
- Before Fed Governor Powell’s press conference last week, markets had scant doubt about another interest rate cut happening in December; that certainty has now been shaved by about a third.
- The Reserve Bank of Australia‘s Official Cash Rate, which had been cut after reviews in February, May and August earlier this year, was kept steady at 3.60% this time by a unanimous vote. An explanation of latest thinking signals just one quarter percentage point reduction in the coming twelve months.
- At the Central Bank of Armenia where monetary policy was also reviewed today, the key refinancing rate of 6.75% also was not changed. It, too, had note been cut since a 25-bp move last February, which followed cuts totaling 375 bps from June 2023 through the end of last year.
- Japan, too, is hesitant to change the interest rate, only in that case the resistance involves a decision on when to hike the rate again. It is only 0.50% now, a rate not exceeded since October 2008. But the new Prime Minister Takaichi has said the economy seems only halfway to achieving sustainable inflation of 2% and that officials should be cautious in the absence of more convincing signs of stronger wage growth.
Yesterday’s disappointing manufacturing report from the U.S. Institute of Supply Management also has thrown cold water on investor hopes. The ISM PMI for that sector fell unexpectedly in October to 48.7, matching a 9-month low. The lack of closure on the U.S. federal shutdown, now at a record length, also gives investors cause for pause.
PMI news today featured Japan’s manufacturing survey, which at 48.2, was its weakest score in 19 months. Egypt’s non-oil private PMI reading for October also fell short of the 50 neutrality line but at 49.2 was its highest since July. The Saudi Arabian economy has been buoyed by strong investments outside of the oil sector, and it showed in a big jump of that economy’s non-oil private PMI to a 9-month high of 60.2 in October from 56.4 in September and this year’s low last April of 55.6.
Yet another broad reason for markets to treat today’s session as an opportunity for recalibration is that it is America’s Election Day, even with the lack of any congressional or presidential races and just two gubernatorial races at stake (VA and NJ). Whether one supports or opposes what President Trump has done with unexpected speed and push-back, the existence of a truly transformational agenda is beyond doubt. The changes are profound and conflict widely with the framework of 1789 that relied over and over again on the principles that nobody should be above the law, that everyone is entitled to due process of the law, and the need for widely distributed government powers in order to counter the omnipresent dangers of slipping back into tyranny. After 236 years, it may be possible that a more consolidated and less diversified form of government would better facilitate the constitutional goals of “establishing justice, insuring domestic tranquility, providing for the common defense, promoting the general welfare, and securing liberty” for the framers and future generations. However, that is a conclusion that many, not a handful, of people ought to reach in concert. Today’s array of many local and state elections provides the best litmus test in the past year of what American’s citizenry believe on this crucial matter. Paradoxically, today also happens to be the 46th anniversary of the seizure of the U.S. embassy in Tehran and the 17th anniversary of the election of America’s first and so far only president of color, two events that continue to exert profound effects on America’s sense of self-identity. It’s just only reason for markets to stake stock and duck from risk.
In the U.K., Chancellor of the Exchequer Reeves is in the final stages of her budget statement to be presented to parliament later this month, and she has suggested in advance that some tax increases will be unavoidable given the governments large fiscal imbalance.
South Korean consumer price inflation rose in October to a 15-month high 2.4% from 2.1% in the prior month and a low of 1.3% in October 2024.
Romanian producer price inflation jumped to 6.1% in September from 3.2% in August, -0.3% in June and a cyclical low in March 2024 of -8.0%. 6.1% still represents a big drop from the peak of 51.0% hit in the summer of 2022.
Consumer confidence in Mexico dropped to a 3-month low in October. A 0.4% decline of Brazilian industrial production in September was the largest monthly decline since May but associated with a bigger 2.0% increased compared to the year-earlier level.
Fed Governor Bowman has confirmed that, like Governor Miran, she has more concern about recent trends in the U.S. labor market than inflation.
Regarding the aforementioned Reserve Bank of Australia decision earlier today, officials there offered these opinions:
Some inflationary pressure may remain in the economy. With private demand recovering and labor market conditions still appearing a little tight, the Board decided that it was appropriate to maintain the cash rate at its current level at this meeting. Financial conditions have eased since the beginning of the year, but it will take some time to see the full effects of earlier cash rate reductions. Given this, and the recent evidence of more persistent inflation, the Board judged that it was appropriate to remain cautious.
In the National Bank of Armenia’s instance where the interest rate has already been lowered four percentage points since the 10.75% peak,
Wage growth, non-traded sticky price inflation, and inflation expectations continue to stabilize. At the same time, risks for short- and medium-term demand pressures from fiscal policy persist. In the context of current macroeconomic developments, financial markets in Armenia generally expect the Central Bank of Armenia to gradually lower the refinancing rate over the next twelve months to approximately 6.25-6.50%.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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