USD retains a firm undertone - Scotiabank

The US Dollar (USD) retains a firm undertone, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD remains firm, holds near recent peaks

"The DXY made a marginal new high--above Friday's peak--a little earlier today before easing back but it's still a case of the market's revised rate outlook and firmer market-driven rates providing the essential support for a firm, and perhaps firmer still, dollar overall. The risk mood is a little soft today as Chinese shares flounder on fading stimulus hopes. US equity futures are lower on rates and regulatory concerns."

"The DXY is trading close to estimated fair value (based on index-weighted 2Y spreads) which may suggest limited scope for additional gains absent a further shift in yields or spreads. But seasonality is positive for the DXY in October and November and technical pointers still suggest scope for the DXY to recover more of its H2 decline (towards the 103/104 range potentially)."

"It's another light day of calendar risk. US data points are limited to Wholesale Inventories and the FOMC Minutes--which may look a little dovish but which have perhaps been surpassed by recent events. There is a 10Y bond reopening and a fair bit more comment from Fed speakers over the session (Bostic, Jefferson and Daly are the voters among them)."