观点

The dollar index closed lower last week brining an end to four consecutive week of gains that had lifted it to a fresh year-to-date high of 102.95.

The US dollar’s failure to extend its gains last week following the release of stronger US inflation data was disappointing and has likely encouraged some investors to trim long positions accumulated over the past month.

However, this dynamic also leaves the USD more exposed to a reversal if sentiment towards AI deteriorates.

In our earlier update, we cautioned that energy prices, bond yields, and the US dollar would likely move higher before any resolution of the Middle East conflict.

A partial offset to weaker growth in domestic demand is provided by a slightly more positive outlook for exports (particularly exports of manufactured goods and tourism inflows) because of a downward revision to our expectations for the NZ dollar.

We now expect NZD/ USD to end this year around current levels at 0.56 – 3c lower than expected previously – before appreciating to around 0.64 over the course of 2027 as interest rate differentials with the US gradually close and as the USD appreciates.

Last week we raised our forecast for CPI inflation at year end to 4.3%yr, largely on account of recent developments in global energy prices (although the weak NZ dollar has compounded the effect).

Expect more consolidation in FX markets today and more interest in local stories, such as Indonesia's equity travails FX markets remain caught between intensifying inflation and a re-pricing of AI risk USD: What does the flatter yield curve mean?

It is only when short end rates break lower that the dollar is ready to drop.

Barring another big leg down in AI stocks and risk assets in general, expect the dollar to consolidate near recent highs.

DXY will probably struggle to get above the 102.40/50 area now, while support is 101.75/80.

EUR/USD has received a lift from this week's unease in US AI stocks and may be entering a decent consolidative phase now.

• Corporates expect AUD/USD to keep falling, but more gradually than previously forecast.

Corporates still expect the Australian dollar to weaken over the coming year - to around 0.70 by end-March 2027 and 0.68 by end-September 2027 - but the pace of decline has slowed since the July survey.

"The shift likely reflects the resilience of the Australian dollar during the survey period between mid-August and mid-September, supported by a reassessment higher of Australian interest rates, a lift in commodity prices and strong risk sentiment despite the unresolved Middle East conflict," Kong said.

• Currencies: US dollar modestly weaker , sterling outperforms • US producer prices jumped 1.3% month on month in September, the largest rise since March 2022 and well above the 0.5% forecast.

After the close Interactive Brokers beat, at USD 0.69 against USD 0.67 expected on revenue of USD 1.91 billion, and raised its dividend, though the shares traded about 2% lower.

Hotter-than-expected consumer and producer inflation readings have failed to trigger renewed selling, with the rebound instead supported by falling bond yields, a softer dollar and a midweek wobble in equity markets, particularly technology stocks.

• The US dollar weakened slightly, especially early Friday as USDJPY rolled back below 158.00 after squeezing back above that level late Thursday.

And when Warsh talks about loose financial conditions, given that Treasury yields are north of 5% and the dollar has been getting stronger over recent weeks – both of which have tightened conditions – you’ve got to assume he’s really talking about the Teflon US equity market.

1 16 October 2026 16 October 2026 Bullish USD trend suffers setback FX View: The USD is on course to weaken this week, bringing an end to four consecutive weeks of gains.

After climbing to a fresh year-to-date high following the stronger-than-expected US CPI report for September, the USD quickly surrendered those gains, marking the beginning of the current pullback.

If the Democrats take control of Congress, it could contribute at the margin to a further pullback in US yields and the USD.

However, heavily overweight positioning leaves the USD vulnerable to a reversal when sentiment towards AI deteriorates.

IMM FX Positioning: The latest IMM positioning data for the week ending 6 October showed that leveraged funds reduced their short USD positions for a third consecutive week.

The SEK and NZD were among the worst-performing currencies during the USD rally between 9 September and the recent peak in the dollar index on 14 th October.

In contrast, the AUD has underperformed the NZD, weakening against the USD this week and pushing AUD/USD back towards the 0.6900 level.

The USD’s failure to extend its gains this week following the release of stronger US inflation data has been disappointing and has likely encouraged some investors to trim long positions accumulated over the past month.

The rally extended further along the curve, with the 10-year yield falling from 5.32% following the CPI release to around the 5.05% range, while the dollar retreated from its recent highs.

1 16th October 2026 Warsh focuses on AI rather than Fed policy 16 th October 2026 USD: Warsh reduces rate hike expectations by saying nothing The US dollar is broadly unchanged following the comments from Fed Chair Warsh.

The Korean won is an incredible 16% stronger versus the US dollar H2-to-date despite the Kospi falling notably as the AI trade suffers.

These big moves continue to highlight the potential for positions being unwound which could see the US dollar suffer given the recent strengthening and demand for the dollar.

That richness in the yield curve will likely act to curtail near- term momentum for further appreciation of the dollar.

The pound is roughly unchanged versus the US dollar since the end of June with only the energy-related CAD and NOK outperforming and the yen, helped by yen buying intervention by the MoF, with assistance from the US.

USD/KRW: BoK likely to hold next week The Korea ’s equity market experienced a sharp correction as concerns over AI funding lingered throughout the week, down by as much as 16% on Thursday before some mild recovery ended the week.

In time, both trade and income receipts from offshore investment should buoy the renminbi, although for now continued outbound foreign investment should moderate the pace of gains against other nations in the region, and likely versus the US dollar.

Europe is weathering the energy shock better than feared and has far more fiscal room to respond than the US – one reason we still see the US dollar trending lower over the next two years.