Dollar Drifts Lower On Geopolitical Tensions


The US dollar drifted lower against its key counterparts in the European session on Tuesday, tracking a decline in treasury yields, as disappointing earnings results, as well as geopolitical tensions surrounding the death of Saudi journalist, triggered a sell-off in global shares.

The benchmark yield on the 10-year note fell 3.15%, while that of 2-year equivalent was down by 2.88%. Yields move inversely to bond prices.

Traders were concerned about growing isolation of Riyadh after the death of journalist Jamal Khashoggi at the Saudi consulate in Istanbul earlier this month.

US President Donald Trump expressed dissatisfaction over the response of Saudi to the killing of journalist and called to speed up their investigation.

Treasury Secretary Steven Mnuchin canceled his meeting at Saudi investment conference on Monday, although he met Saudi Arabia’s crown prince Mohammed bin Salman and stressed the importance of Saudi-US strategic partnership.

The budget row between Italy and the EU, as well as Brexit worries, also weighed on sentiment.

Fed members Neel Kashkari, Raphael Bostic and Robert Kaplan are set to speak at separate events later in the day.

The currency traded mixed against its major opponents in the Asian session. While it rose against the euro and the pound, it held steady against the franc. Against the yen, it fell.

The greenback dropped to 1.3044 against the pound, from near a 3-week high of 1.2937 hit at 2:00 am ET. The next possible support for the greenback is seen around the 1.32 level.

After rising to a 4-day high of 1.1440 against the euro at 2:00 am ET, the greenback reversed direction and dropped to 1.1486. If the greenback falls further, it may find support around the 1.16 level.

Figures from Destatis showed that Germany’s producer prices rose the fastest pace in a year in September.

Producer prices grew 3.2% year-on-year in September, after rising 3.1% in the previous month. Economists were looking for a 3.0% gain.

The greenback dropped to a 5-day low of 112.10 against the yen, from a high of 112.84 hit at 6:30 pm ET. On the downside, 110.00 is possibly seen as the next support level for the greenback.

The greenback reversed from an early high of 0.9971 against the franc, sliding to 0.9941. The greenback is poised to challenge support around the 0.97 mark.

Looking ahead, at 10:00 am ET, Eurozone consumer sentiment for October is due.

At the same time, Richmond Fed manufacturing index for October is set for release.

At 11:20 am ET, the Bank of England Governor Mark Carney speaks about artificial intelligence and the world economy at the Annual Machine Learning and the Market for Intelligence Conference in Toronto.

Federal Reserve Bank of Atlanta President Raphael Bostic speaks about the economy and monetary policy at Louisiana State University in Baton Rouge at 1:30 pm ET.

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