[MARKET ANALYSIS] Dollar is flat ahead of the midterms, while yuan weakens after the PBoC raised its FX RRR

DXY: Flat

• Struggles for direction in quiet FX trade and after softening yesterday amid the mixed performances in its major counterparts, while currency-moving catalysts remain light as participants await the US midterm elections and with geopolitical headlines providing mixed signals, as US President Trump stated that a deal with Iran could happen, although it was also reported that the US conducted a small-scale, defensive strike on Iran's Qeshm Island.

EUR/USD: -0.1%

• Partially faded some of its recent gains with the single currency continuing to trickle lower beneath the 1.1200 handle.

GBP/USD: Flat

• Trades flat after its recent indecision amid light pertinent newsflow and with the BoE expected to hike rates on Thursday.

USD/JPY: Flat

• Takes a breather following its recent advances and stalled just beneath the 158.00 level amid the closure of markets in Japan.

Antipodeans: AUD/USD Flat / NZD/USD -0.2%

• Lacks demand in the absence of relevant tier-1 data, and with AUD/USD flat heading into a widely expected RBA rate hike today, while price action is also not helped by the pressure in the yuan after the PBoC announced it would raise the FX RRR by 2ppts from 4% to 6% effective November 15th, which effectively reduces dollar liquidity in the market and suggests the PBoC is aiming to slow the appreciation of the yuan.

A pre-event session of this kind, with the dollar directionless into a US election and rate decisions from the BoE and RBA already flagged as expected, fits the established pattern in which positioning compresses ranges and the realised moves come from the outcomes rather than the wait. With both central bank hikes described as anticipated, precedent says the reaction function is in the guidance and the vote split rather than the decision itself; fully priced hikes that deliver hawkish forward language have tended to extend the currency, while in-line statements have faded it. The substantive item is the PBoC's FX reserve requirement hike, a tool it has used in both directions over past cycles: raises tighten onshore dollar liquidity and lean against yuan appreciation, cuts do the reverse, so the direction of the adjustment is itself the signal of official discomfort with the pace of the move. The channel to the antipodeans runs through the yuan as the regional proxy, and episodes of PBoC leaning against CNY strength have typically capped AUD and NZD only at the margin unless accompanied by fixings that confirm the intent. Worth watching from here is whether the daily fixing reinforces the RRR message, whether the election result shifts the fiscal and tariff outlook enough to break the dollar's range, and how the BoE and RBA frame the path beyond the expected moves.