The US dollar remains near an 18-month high as Federal Reserve meeting minutes highlight inflation risks.
智通财经2026/10/08 07:361. On Thursday, the US dollar steadied near an 18-month high amid quiet trading in the Asian session. Previously released minutes from the Federal Reserve Federal Open Market Committee signaled a hawkish stance, indicating that policymakers see inflation as the greatest risk to their economic outlook. 2. The dollar index remained stable near 102.30, rising 0.3% on Wednesday and still staying close to its highest levels since April 9, 2025. Federal Reserve policymakers unanimously voted to raise rates by 25 basis points at the September 15-16 meeting, but Wednesday's minutes revealed divisions among officials regarding the rationale for the hike. 3. Analysts at Westpac wrote that the minutes reinforced the hawkish tone accompanying the September rate increase, with the majority of participants still viewing further policy tightening as appropriate, and nearly all participants seeing inflation risks skewed to the upside during the meeting. 4. The yield on US 10-year Treasury bonds rose by 4.4 basis points to 5.329%. Analysts at Mitsubishi UFJ Financial Group commented that continued selling of US Treasuries is becoming an increasingly important driver in global markets. Should long-term Treasury yields rise further, market focus could shift to a comprehensive tightening of US financial conditions and whether policymakers begin to show greater concern over the state of the Treasury market. 5. However, the minutes did not alter market expectations that the Federal Reserve will hold rates unchanged at the October meeting. The CME FedWatch tool shows that federal funds futures pricing now indicates an 81.7% probability that the Fed will keep rates steady in October, slightly up from 80.1% the previous day.
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Increased volatility makes arbitrage trading vulnerable; if the stock market corrects, it could face a crash.
(1) Market analyst Jeremy Boulton stated that as market volatility rises and exchange rate fluctuations widen, currency carry trades are becoming increasingly vulnerable. (2) Adverse exchange rate movements may be sufficient to offset gains brought by favorable interest rate differentials, or even cause greater losses. (3) Some of the most popular carry trade currencies have already experienced substantial adverse price moves: since the outlook for a Federal Reserve rate hike in September became clear, the Mexican peso has fallen by as much as 9%, the South African rand has declined by over 5%, and the Hungarian forint has dropped by more than 7%. (4) Japan has taken measures to support the yen, leading to a slight appreciation, while a sharp sell-off in French bonds has hurt market confidence, dragging down the euro and boosting the Swiss franc. (5) This has further intensified the losses faced by carry trades that rely on stable market conditions. If the stock market undergoes further corrections, carry trades may face a collapse. (6) As investors take profits before year-end and amid the uncertainty of the US elections in November, equities and other risk assets may come under additional pressure.
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