Dollar Firmer As Fourth Quarter Commences
October 1, 2026
The weighted DXY dollar index is at a 17-month high and 0.4% above the third quarter’s closing level. Overnight gains range between 0.3% and 0.4% against the yen, euro, sterling, kiwi and won and 0.5-0.6% relative to the Mexican peso and Indonesian rupiah. The dollar is unchanged against the Aussie dollar and Swiss franc and up just 0.1% versus the Canadian dollar.
The dollar benefited from higher oil prices, up 2.0% in the case of the West Texas Intermediate crude price and +2.6% on Brent.
Bitcoin’s strong advance last quarter extended into the new month with a gain of 0.5% so far. Gold’s price is up 0.4%.
The 10-year U.S. Treasury yield is unchanged at a lofty 5.29% in contrast to lower 10-year sovereign debt yields of six basis points in Japan and by 5 basis points in Germany, four bps in France, and 3 bps in Spain and Italy.
China’s market is closed for a week. In other stock exchanges, Japan’s Nikkei rose 3.3%, but Australia’s and Indonesia’s lost 2.0% and 1.6% on this opening day of the new quarter. Major European stock markets are all down so far, led by a 1.1% decline in the British FTSE. Key U.S. indices in futures trading an hour and half before the opening bell were up 0.2-0.6%.
Market expectations about the timing of coming central bank interest rate changes have been tweaked in several respects.
- The heavy prior odds attached to a Fed rate cut at the next meeting have been scaled back significantly to only about a three in eight probability in the wake of last weeks U.S. data including the PCE price deflator.
- A summary of the recent Bank of Japan Board meeting that raised its interest rate to 1.25% opines that more frequent rate increase might become appropriate but is vague about whether another move will occur in 2026. This disappointed investors to some extent, sending the yen as low as 158.46 per dollar.
- Bank of England Governor Bailey, who has been part of the majority holding interest rates steady, indicated that the case for an increase is rising.
Today’s data menu features September manufacturing purchasing manager surveys, the Bank of Japan’s quarterly Tankan survey of corporate business conditions and expectations, Euroland unemployment, and some inflation news.
Further evidence discrediting the conclusion rising unemployment will inevitably follow from sluggish employment growth include today’s reports that new jobless claims stayed below 200k last week and the September Challenger report that showed fewer job cuts than either in August or September 2025.
Although accelerating to a 25-month high in September, inflation of 1.0% in Switzerland continued to run lower than in most countries around the world, and the core CPI inflation rate was only 0.5%.
Indonesian consumer price inflation of 3.3% in September was at a 3-month high.
Irish CPI inflation held at a 3-year high of 3.9%.
The 0.8% 12-month rise in Britain’s Nationwide house price index last month was only half as much as in August.
In Pakistan, in contrast, CPI inflation of 10.3% last month was in double digits for the fourth time in five months.
Among manufacturing purchasing manager indices last month, most countries had a reading above 50, the level that delineates expanding from worsening conditions.
Euroland’s factory sector PMI of 52.9 was revised marginally higher and represents the fastest improvement in 52 months. Subindices for production and orders climbed to 55- and 54-month highs, but a note inspiring some concern was the upturn in input and output price pressures last month. Euroland’s expanding manufacturing activity became broader last month, as the indices for both France and Germany were each a tad below their August readings.
The British PMI rose 0.9 points to a 2-month high of 51.9.
Some of the more robust PMI scores included Japan (54.9), the Philippines (49.6), Thailand (54.3), India (55.1), Ireland (55.5), Sweden (58.1) and Switzerland (55.9). Readings of 49.0 in Poland, 47.9 in Turkey, and 49.8 in Russia, all at 2-month lows, were among those south of the 50 level of neutrality.
Diffusion indices for manufacturers, both large and small, reported in the Japanese September Tankan survey were even more positive than those in the June survey. The non-manufacturing results were solid but not quite as much as in June. Projected business investment in the current fiscal year among all 9104 firms participating in the survey was revised a bit higher.
Copyright 2026, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan Tankan survey, manufacturing purchasing manager surveys
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