U.S. Dollar Declines with Lower Yields; Stocks Fluctuate Amid Election and Rate Pressures

TOKYO, Oct 25 (Reuters) – The dollar was on the defensive on Friday following its biggest drop in a month against major peers, as it tracked a retreat in U.S. yields from nearly three-month highs after depressed Treasury prices drew buyers.
Asian stocks were mixed, with some markets tracking Wall Street gains from overnight, while Japan’s Nikkei (.N225), opens new tab dropped 1% after the yen rebounded strongly from a three-week trough to the dollar and with the coalition government at risk of losing its lower house majority in an election on Sunday.
Hong Kong’s Hang Seng (.HSI), opens new tab and a mainland blue chips index (.CSI300), opens new tab each rose about 1%. Australian (.AXJO), opens new tab and South Korean (.KS11), opens new tab stock benchmarks were flat.
For the week though, the dollar was set for a fourth straight weekly rise and the 10-year Treasury yield for a sixth, driven by a run of robust U.S. economic data that signals a very patient approach to Federal Reserve interest rate cuts.
Surging bond yields have spooked stock investors, putting the MSCI world equities index (.MIWO00000PUS), opens new tab on track for a 1.2% slide this week.
Crude oil is set for a weekly advance amid simmering risks to output from the conflict in the Middle East. Safe-haven gold is headed for a third winning week.
A parade of potentially pivotal events begin next week with the monthly U.S. payrolls report on Friday. The U.S. presidential election follows on Nov. 5, with a Fed policy decision two days later.
Earnings reports are also due from such mega-cap tech names as Alphabet, Amazon, Apple, Meta, and Microsoft.
“There remains a degree of caution in the markets, with the performance of equities mixed due to the combination of macroeconomic, earnings and political risk on the horizon,” said Kyle Rodda, senior financial market analyst at Capital.com.
In terms of economic data overnight though, “the narrative was a positive one and opened up the room for a touch of risk-taking,” Rodda said.
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