Dollar Drops a Fourth Day on Prospects of Govt Deal
The dollar reversed Asia-session gains and headed for a fourth daily drop as a record-long US government shutdown neared its end.
Risk-sensitive currencies rally, with Antipodean and Scandinavian currencies leading gains. The Bloomberg Dollar Spot Index slips 0.1% while 2-3bps of bullish options premium is priced out across the skew.
A group of eight Democrats on Sunday broke with the rest of their party to vote with Republicans to advance a bill to re-open the government on the impasse’s 40th day.
Treasuries drop with the 10-year yield up 3bps to 4.13%.
BBDXY drop is contained as the euro is little changed on the day and the yen leads losses.
USD/JPY rallies 0.5% to 154.23; the volatility skew in the yen keeps showing lower confidence of another Bank of Japan interest-rate increase this year, despite comments from policymakers.
EUR/USD trades at 1.1568; the euro also enjoys a fresh wave of bullish demand versus the greenback through options as one-week risk reversals undergo a bullish repricing of nearly 60bps within just three days.
AUD/USD advances 0.7% to 0.6539 to lead gains among its Group-of-10 peers. Along with the risk-on sentiment, an unexpected rise in China’s consumer prices in October also lent support to the currency.
Source : Bloomberg.com
