A Mostly Softer Dollar This Wednesday
October 21, 2026
The U.S. currency has declined so far today by 0.5% against the Australian dollar, 0.4% relative to sterling 0.3% versus the yen and Swiss franc and 0.1% against the Canadian dollar and kiwi. Exceptions to this trend include dollar advances overnight of 0.5% relative to the peso and 0.3% versus the rupiah. Factors weighing on the dollar include low confidence that the federal funds rate will be raised next week (now seen as no higher than a one in five probability) and the diminishing magnetism of the dollar for refugee-seeking investments. U.S. fiscal trends are one concern, and America’s courtship of Russia is being viewed with great concern.
The euro has conspicuously been AWOL from the rise in other currencies against the dollar. Europe’s fiscal problems are even more unsustainable than America’s, and street protests especially in France are a further worry.
Most stock markets are firmer today in spite of the dollar’s lessened appeal. South Korea’s Kospi closed 3.3% higher, and share prices rose 0.9% in Japan, Indonesia, and New Zealand. Stock markets in Euroland’s four largest economies currently show gains between 0.7% and 0.9%. In U.S. futures trading, a 1.3% advance in the Nasdaq, buoyed by strong AI-related earnings reports, leads gains in other key market barometers. Laggards elsewhere include a 0.1% uptick in the British FTSE and losses of 0.9% in in Hong Kong and 0.6% in China.
Ten-year sovereign debt yields are mixed with increases of 5, 4, and 3 basis points in France, Italy and Spain and of one basis point in Germany and Switzerland but dips of 3 bps in Australian, 2 bps in Japan, Canada and the U.K. and a single basis point in the United States.
West Texas Intermediate and Brent crude oil prices are marginally lower at $97.92 and 108.49 per barrel. Bitcoin is 0.9% pricier.
There’s been more sour U.S. housing market news. Pending home sales plunged 11.3% in September, their biggest drop in 37 months and fourth decline in five months. Mortgage applications last week fell 5.3% in spite of the first increase in the 30-year fixed mortgage rate in nearly three months. Mortgage applications have now declined for seven straight weeks.
Today’s biggest policy surprise came from Bank Indonesia where authorities decided to leave the 7-day reverse repo rate steady at 5.75%. Since a trio of hikes in May and June totaling a full percentage point, tightening had been paused, but analysts felt that hiatus would end this month given the rupiah’s 3% slide in the past six weeks. Also Indonesian CPI inflation is near its target ceiling of 3.5%. Officials are threading a policy needle. There’s been some intervention support for the currency, whose troubles were sparked by a warning about Indonesia’s stock market from MSCI. Other monetary policy steps taken today were a cut in reserve requirements but a 25-basis point hike in the overnight deposit facility rate to 5.0%.
The National Bank of Georgia’s policy interest rate was also left unchanged today after a scheduled review. Georgian CPI inflation of 5.6% exceeds the 3% target but is attributable to elevated energy costs. Core CPI is just 3.5%, and officials are counting on the war in Iran to end. That said, officials left a caveat: “In the event of the realization of the high-inflation risk scenario, fundamental processes require a higher trajectory of the monetary policy rate than the central scenario. The key risk underlying the high-inflation scenario is a further escalation and prolongation of the conflict in the Middle East, which, amid additional disruptions to oil supply and refining, would push energy prices even higher.”
British consumer price inflation accelerated more steeply in September to an 11-month high of 3.5% from 3.1% in August and 2.6% in June. Producer output price inflation jumped by 0.8 percentage points to a 41-month high of 4.6%, and the reading of 8.3% for producer input price inflation constitutes a 4-month high.
Lebanese consumer price inflation rose to a 4-month high in September of 17.5%, having been as low as 10.9% back in January. In South Africa, consumer price inflation, which had slowed from a 2022 high of 7.8% to a 2025 low point of 2.7%, edged 0.1 percentage point upward to 4.5% last month.
Slovenian and Latvian producer price inflation printed respectively at a 38-month high of 3.9% and a 37-month high of 3.1% last month. And in South Korea‘s case, producer prices climbed 1.2% on month but slowed in year-on-year terms to a 2-month low of 7.7% following August’s reading of 7.9%.
Reserve Bank of Australia Deputy Governor Hauser called the inflation outlook “materially worse” due to recent oil price developments.
Japan’s trade deficit of JPY 537 billion in September was much wider than the year-earlier deficit of JPY 278 billion. The year-to-date deficit of JPY 3.316 trillion already exceeds the full 2025 gap of JPY 1.758 trillion.
Belgian and Polish consumer confidence fell to 6- and 18-month lows in October. Each printed in pessimistic territory.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank Indonesia, British CPI and PPI, Japanese trade deficit, National Bank of Georgia
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