Market News

By Jiaxing Li

HONG KONG, Nov 3 (Reuters) – The US dollar weakened on Tuesday as investors remained cautious over tensions between the United States and Iran ahead of the US midterm elections, while the Australian dollar declined after the Reserve Bank of Australia raised interest rates as expected.

Oil prices edged higher in Asian trading, with Brent crude futures rising 0.5% to $105.25 a barrel, recovering some ground after plunging more than 7% on Monday.

The rebound followed US strikes on Iran's Qeshm Island, which undermined earlier optimism surrounding negotiations between the two countries to end the eight-month war.

Meanwhile, uncertainty surrounding the US midterm elections and an AI-driven stock market sell-off continued to weigh on investor sentiment, providing some support for the dollar.

The dollar index, which measures the US currency against a basket of major currencies, including the yen and euro, edged 0.1% lower to 101.72, following Monday's decline to a one-month low.

OCBC FX strategist Sim Moh Siong said that although relief over oil prices was increasing, broader market conviction remained weak.

He added that lower energy costs were reshaping foreign exchange dynamics, while concerns over artificial intelligence and US election risks continued to provide support for the dollar.

The euro gained 0.1% to $1.1195 as the dollar weakened. The Japanese yen traded at 157.81 per dollar, remaining largely unchanged during a domestic holiday.

Elsewhere, China's offshore yuan was heading for its biggest single-day decline since May, falling 0.36% to 6.671 per dollar.

The sharp decline followed an announcement by the People's Bank of China that it would increase the foreign exchange reserve requirement ratio, a move expected to tighten dollar liquidity conditions and slow the yuan's recent appreciation.

Another Round of Central Bank Meetings

The Reserve Bank of Australia raised its official cash rate by 25 basis points to 4.85% on Tuesday, as widely expected, taking borrowing costs to their highest level since December 2008.

The increase brought total monetary tightening this year to 125 basis points across five rate hikes. However, a relatively narrow 6-3 vote suggested policymakers could be approaching the end of their tightening cycle.

The Australian dollar fell as much as 0.35% to $0.6973 against the US dollar following the decision, while the New Zealand dollar remained unchanged at $0.5616.

StoneX senior markets analyst Matt Simpson said the rate increase had already been priced into the market, while the three dissenting votes suggested declining appetite for further tightening.

Other central banks scheduled to announce monetary policy decisions this week include those of Britain, Norway and Sweden.