(Oct 16): The US dollar headed for a third straight daily loss against the euro while edging up versus the yen on Thursday, as concerns over US-China tensions and dovish remarks from Federal Reserve officials continued to weigh on sentiment.

Analysts say political headwinds have weighed on the yen but expect support to come from looming Fed rate cuts, the end of US quantitative tightening, and a potential rise in market volatility, which usually supports safe-haven assets.

US Treasury yields hovered near multi-week lows, with the benchmark 10-year just above 4%, pressuring the dollar as investors also weighed a prolonged US government shutdown.

The Fed’s Beige Book released Thursday offered little support to US rates, pointing to emerging signs of economic weakness, including rising layoffs and reduced spending among middle- and lower-income households. Fed Governor Stephen Miran said on Wednesday cutting rates is now more important.

The dollar index, which measures the greenback against six other currencies, was down 0.05% at 98.63, and was on track for a weekly decline of around 0.3%.

Rare earths in focus

Investors were scrutinising China’s latest expansion of rare earth export controls, a move sharply criticised by senior US officials on Wednesday, who warned that it could disrupt global supply chains.

"The question for financial markets is whether China's proposed export controls on rare earths are merely part of a bargaining ploy to achieve greater concessions from the US," said Chris Turner, global head of markets at ING.

Amid the tit-for-tat action, US President Donald Trump still expects to meet Chinese President Xi Jinping in South Korea this month, US Treasury Secretary Scott Bessent said.

"An extension, rather than a grand bargain that settles all trade issues, is probably the most realistic second-best outcome compared to the alternative of escalation of retaliation," said Joseph Capurso, head of foreign exchange at Commonwealth Bank of Australia.

The Australian dollar was flat at US$0.6511 after data showed unemployment hit a near four-year high in September, adding to the case for interest rate cuts.

The Aussie, often considered a proxy for risk appetite, has been volatile this week due to the trade tension as traditional havens gained.

China's yuan firmed to a two-week high against the US dollar on Thursday after the central bank set its strongest daily midpoint in a year.

French political drama in the background

The euro touched a one-week high and was up 0.10% at US$1.1656 as traders braced for yet another episode in the French political drama, with Prime Minister Sebastien Lecornu likely to survive two no-confidence votes in parliament.

France's political crisis has barely affected euro zone sovereign bond markets as investors see no room for a selloff in French bonds without snap elections.

However, by shelving pension reform until after 2027, France’s prime minister has managed to defuse a sharp escalation in the crisis, though at the cost of complicating efforts to rein in public finances, analysts said.

The yen briefly firmed to a one-week high of 150.51 per dollar but was up 0.05% at 151.11. Japan's weakened Liberal Democratic Party is set to begin policy talks with the right-leaning Innovation Party on Thursday that could help Sanae Takaichi clinch a prime ministerial vote expected next week.

"Regardless of the outcome of the prime ministerial election, it is highly likely that the market will price in some expansionary fiscal policies," said Shinichiro Kadota, head of Japan forex and rates strategy at Barclays Tokyo.

"We remain long on the US dollar versus the yen given the risk of a further rally but with eyes on an eventual intervention risk or Bank of Japan hike if the move extends."

Source: Theedgemarkets

This morning, the USD/CHF exchange rate slipped below 0.7944 for the first time since 1 October, as demand for safe-haven assets intensified — a trend also reflected in yesterday’s record gold price above $4,200.The traditionally stable Swiss franc is strengthening amid rising global uncertainty and risk aversion:

→ In Japan, the upcoming prime ministerial election could significantly impact monetary policy, while France faces ongoing political turmoil.

→ In the United States, the government shutdown continues, and traders are closely watching developments around a potential trade deal with China, possibly to be discussed during an expected meeting between the two countries’ leaders.

Technical Analysis of the USD/CHF Chart

As noted in our 25 September analysis, the Swiss franc has appreciated through 2025 amid elevated geopolitical and macroeconomic risks, forming a downward channel on the USD/CHF chart (shown in red).

We also highlighted:

→ the possibility of a trend reversal around the 0.7900 support area;

→ potential breakout targets (shown in blue).

Since then, the bulls have indeed made progress, driving the price up towards point A and:

→ breaking above the red channel’s upper boundary;

→ overcoming the psychological 0.8000 level.

However, that progress has not been sustained. Among the bearish signals:

→ the median line of the blue channel acted as resistance;

→ the brief move above local highs around 0.8072 resembles a bearish liquidity grab.

From the bullish perspective, USD/CHF has now retreated into a zone that could act as support:

→ the upper boundary of the red channel;

→ the lower boundary of the blue channel.

The arrow highlights signs of a bullish engulfing pattern, suggesting that buyers may be using these support zones to stage a rebound within the blue channel. The 0.8000 psychological mark could serve as the first key test of their resolve.

Source: FXOpen

Key points:

China has yet to secure much of its soybean supply for December and January as high premiums for Brazilian cargoes discourage buyers, a development that could prompt Beijing to tap state reserves to meet near-term needs, three trade sources said.China still needs to purchase about 8–9 million metric tons of soybeans for December-January shipment after covering cargoes through November with hefty purchases of Argentine beans in recent weeks, the sources said. Escalating Washington-Beijing trade tensions continue to shut out U.S. supplies.

"China is not buying U.S. beans because of the trade war and Brazilian beans are too expensive," said one oilseed trader at an international trading company which supplies agricultural products to China."China might end up using its own reserves for the year-end and early next year, before the new South American harvest comes in." he said.

BRAZILIAN SOYBEAN PREMIUMS

Brazilian soybean premiums are holding at $2.8-2.9 per bushel over the November Chicago soybean contract (SX25) compared with U.S. premiums at around $1.7 per bushel.Crush margins have been in negative territory (CNSOY-RZO-MRG) for most of the second half of the year.

Thomson ReutersChina's record soybean imports weigh on crush margins

Crushers have little motivation to secure December-January soybean cargoes as supplies from Brazil have squeezed their margins, said a Shanghai-based trader.Chinese buyers are hoping that an early and record soybean harvest in Brazil in early 2026 will help ease prices.Brazilian farmers are expected to harvest a record 177.64 million metric tons of soybeans in the 2025/26 season, around 6 million tons more than the previous year, crop agency Conab said.

"We think new crop shipments from Brazil can start at end of January," said a second oilseed trader. Sources declined to be named as they were not authorised to speak to media.

U.S.-CHINA SOYBEAN TALKS

Chinese buyers have also not yet entirely written off U.S. supplies, with oilseed processors likely to make purchases for December-January if there is a trade agreement between the two governments, traders and analysts said."If a deal goes through, Chinese buyers will likely turn to U.S. beans for the two-month window, with prices more attractive than South American offers," said Johnny Xiang, founder of Beijing-based AgRadar Consulting.Soybeans are expected to feature on the agenda for a potential meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea. Beijing has, however, yet to publicly confirm the talks.

On Tuesday, Trump accused China of "purposefully" avoiding U.S. soybean purchases, calling it an "economically hostile act" that has "caused difficulties" for American soybean farmers.Since the first Trump administration, China has diversified its soybean imports. In 2024, China bought roughly 20% of its soybeans from the U.S., down from 41% in 2016, customs data shows.

Source: TradingView

Asian Stocks Track Wall Street Gains Amid Global Optimism

South Korea’s Kospi Hits Record on Tech and Trade Deal Hopes

China Mixed, Australia Buoyed by Gold Surge

Broader Asia Follows Uptrend; Wall Street Volatility Underpins Global Sentiment

Oil and Currency Markets Show Modest Movement

Earnings, Gold, and Rate Cut Bets Steer Sentiment

Source: AP

Gold Rally Accelerates on Policy and Geopolitical Uncertainty

Rate-Cut Bets and the Debasement Trade Drive Momentum

Trade War Escalation Sparks Safe-Haven Demand

Liquidity Squeeze in Silver Market Adds Fuel

Gold Reclaims Its Role as Strategic Hedge

Source: Bloomberg