Dollar Surges on Japan's Debt Concerns

The greenback is on fire today—USD index climbed +0.39% to a 1.5-week peak as the yen got hammered to a 9.75-month low. Here’s what’s moving markets:

The Yen Collapse: Japanese PM advisor Goushi Kataoka just dropped dovish comments, saying the BOJ won’t hike rates before March. But the real kicker? Japan’s eyeing a ~20 trillion yen ($129B) stimulus package to juice demand—way bigger than last year’s 13.9 trillion yen plan. This debt explosion spooked the yen.

Dollar Gets a Boost: US trade deficit shrank harder than expected—down to -$59.6B in August from -$78.2B in July (expected: -$60.4B). Meanwhile, mortgage applications dropped 5.2%, and 30-year rates ticked up 3 bps to 6.37%.

Fed Rate Cuts Cooling Off: Markets now price only 47% odds of a 25 bp cut on December 9-10, down from 70% earlier this month. Traders are rotating away from rate-cut bets.

Winners & Losers:

• EUR/USD: Down 0.23% as dollar strength dominates
• Gold/Silver: Rallying (+1.55%/+3.03%) on safe-haven demand from BOJ uncertainty, but fighting dollar headwinds
• Central bank gold buying remains solid—China’s PBOC hit 74.09M oz in October (12th consecutive month adding)

The Tension: Gold has hawkish Fed comments + strong dollar working against it, but BOJ dovishness + geopolitical uncertainty keeping the bid alive.