DOLLAR VIEW

The dollar rose to four-year highs against other majors this month as the Fed moves closer to raising interest rates. Emerging market currencies were also hit hard by the mighty dollar, while equity markets were shaken by geopolitical concerns between Russia and the West as well as Middle East tensions. Meanwhile, the dollar's strength provided gold with its worst monthly performance in over a year. We cover it all, and more, in our September Newsletter, including the most relevant economic trends and, as always, don't miss our cartoons!

News Summary

The dollar rose to four year peaks against the other major currencies in September, with the dollar index on track to post its largest monthly gains since February 2013, amid expectations that the Federal Reserve is growing closer to raising interest rates.

Mid-month the Fed outlined in more detail how it will start to raise short term interest rates when the time comes. The central bank also cut its' monthly asset purchase program by another $10 billion, keeping the program on track to end next month.

The euro fell to two-year lows against the dollar after data showed that the annual rate of inflation in the euro area slowed to a five year low of 0.3% in September. The weak data added to pressure on the European Central Bank to implement quantitative easing measures to stave off the threat of deflation in the region.

The yen tumbled to six year lows against the dollar as the Bank of Japan looked likely to stick to its looser monetary policy stance amid concerns over the outlook for the economic recovery. The New Zealand dollar was the worst performing major currency in September, ending the month down around 7%. Emerging market currencies were also hard hit by the dominant dollar, with the Russian ruble falling to record lows against the greenback.

Elsewhere, the rift between Russia and the West over the conflict in Ukraine, as well as heightened tensions in the Middle East, rattled equities markets. Pro-democracy protests in Hong Kong also added to concerns over geopolitical risks.

The MSCI World Stock Index was set to end the month around 3% lower, and was on track to notch up its worst quarterly decline since the second quarter of 2012, at the height of the euro zone sovereign debt crisis.

In commodities markets, gold ended the month with losses of around 6% amid expectations for higher U.S. interest rates, the worst monthly performance in a little over a year, amid expectations for higher U.S. interest rates. The precious metal struggles to compete with yield-bearing assets when rates are on the rise.

Crude oil ended the month down more than 1%, while global benchmark Brent tumbled more than 5% as concerns over abundant supplies weighed.