US FX WRAP: Dollar gains on persistent rate hike calls

USD strength carried over through Tuesday as rate hike expectations held despite the continued downward pressure in energy prices. Fedspeak was seen from 2027 voter Barkin and 2028 voter Collins, both expressing support for last week's rate hike. Collins described the FFR as somewhat restrictive, whilst Barkin noted that there is momentum outside data centres and AI, with consumer spending holding up and strength in defence and manufacturing.

Outside of Fed speak, the focus was on the UNGA, in which Trump met with several leaders. The highlight came via Trump noting US officials met with the Iranian delegation, describing the meeting as very productive, adding he would prefer to make a deal. Meanwhile, earlier Kyodo reports noted that Iranian officials said Iran could reopen the Strait in seven days, once the US ends its blockade (later corroborated by a Reuters source). Later, Iranian sources via Fars rejected the reports. DXY hit highs of 100.70 before trimming to around 100.58.

CAD, GBP, and EUR, JPY, and AUD all traded mostly lower vs the buck. Meanwhile NZD saw modest strength; RBNZ Governor Breman said persistently higher oil prices would lift near-term inflation above September assumptions, adding that the bank will assess incoming data and global developments before its October decision, while significant risks remain and the economic recovery is continuing but uneven. Currency-specific newsflow was light outside of geopolitical/energy developments. Attention will look towards the Trump and Xi meeting on Thursday, alongside rate decisions from the SNB, Norges Bank, and Riksbank.