From October 20-22, by the banks of Shanghai's Huangpu River, the 2026 Sustainable Global Leaders Conference returns once again. Nobel and Turing Award winners will take the stage to discuss the future and trends of technology, and the internet-famous professor who "rescues" people from anxiety and the era of involution—McFarland—will hold a live dialogue with Xiang Biao! Limited seats available, first come first served. Let us journey together toward sustainability! [Click to Register]
The US Dollar Index traded in the 101.80 to 101.85 range during Monday's Asian session, essentially flat compared to Friday's close of 101.84, having briefly touched 102.01 in early trading before quickly pulling back, with an intraday range of roughly 25 points. The dollar is exhibiting a high-level consolidation pattern amid a mix of interwoven factors, with both bulls and bears remaining cautious.
Social unrest in France is providing short-term safe-haven support for the dollar. The French 10-year government bond yield has risen to nearly 4.85%, approaching the more than 20-year high of 5% touched earlier this month, with financing costs now exceeding those of Greece, Italy, and other countries that were once mired in the European debt crisis. As of the second quarter of 2026, France's public debt has reached 3.6 trillion euros, equivalent to 119% of GDP, with the fiscal deficit ratio projected at 5.4%, far exceeding the EU's 3% ceiling. The wave of protests has spread to Portugal, Italy, Spain, and other European countries, reigniting market concerns over sovereign debt risks in the eurozone. Amid risk-aversion sentiment, the dollar rebounded from the two-week low touched on Friday.
However, the dollar's safe-haven luster is being dimmed by financing concerns in the AI sector. Recently, high-yield bonds of some AI-related companies have fallen to about 80% of face value, raising questions about the market's capacity to absorb AI infrastructure financing. OCBC strategists noted that AI has become an important pillar supporting US growth, risk assets, yields, and the dollar, but this support is "a double-edged sword"—if the investment cycle cools, the same support could reverse, putting pressure on the dollar even in a safe-haven environment. When shocks are centered on the United States, safe-haven demand for US Treasuries pushes yields lower, while weak US asset returns reduce the dollar's relative appeal, forming a rare combination of "rising risk aversion + falling US Treasury yields + a weakening dollar."
Regarding Fed policy expectations, Chairman Warsh's "no pre-judgment" remarks at the IMF annual meeting in Bangkok last Friday continue to reverberate. Market expectations for the October 28 policy meeting to keep rates unchanged have risen to 83.9%, with the probability of a 25 basis point rate hike at only 16.1%. However, rate hike expectations for the December meeting remain strong—the probability of a 25 basis point hike stands at 77.3%, while the probability of a 50 basis point hike is 14.5%. This means the tightening cycle has not ended, only that the timing of implementation has been delayed, and the dollar continues to receive medium-to-long-term support overall.
From a technical perspective, the US Dollar Index is running above its 20-day exponential moving average on the daily chart, maintaining a short-term bullish structural bias. The RSI is around 57, above the neutral 50 line, indicating sustained upward momentum rather than overbought conditions. Upside resistance levels are, in order, 102.01, 102.40 to 102.50, and 103.00. Downside support levels are, in order, 101.65, 101.40, and 101.00. If the index effectively breaks below 101.65, the short-term bullish structure may be weakened, and the dollar could pull back further into the 101.40 to 101.00 area; if it manages to reclaim and hold above 102.00, it could once again challenge the 102.40 to 102.50 resistance zone.
Editor's Summary
The US Dollar Index is currently caught in a tug-of-war between "safe-haven support from French unrest and Middle East geopolitical tensions" and "AI financing concerns dimming the dollar's luster." Warsh's ambiguous remarks are weighing on the dollar's upward momentum, but December rate hike risks remain, and the dollar continues to receive medium-to-long-term support overall. Going forward, key focuses will include the October 28 Fed rate decision, French bond market movements, debt performance in the AI sector, and US retail sales and PPI data.
Comments