Insights 
VT 
The US Dollar is strengthening against major currencies, surpassing the 99.50 mark on the DXY, the highest since August. This rise follows last week’s Federal Open Market Committee support. US yields have firmed post-Federal Reserve decisions, offering temporary backing to the Dollar, though seasonality might soon decline.
Global equities are stable as markets shift focus to earnings rather than the Federal Reserve’s outlook, lifting currencies like ZAR, MXN, and AUD. The Swiss Franc underperformed after lower-than-expected October CPI data, while the Japanese Yen remains flat amid concerns over exchange rates and potential Japanese interventions.
Fed Diverging Views
Fed policymakers express divergent views on rate decisions, reducing easing expectations for December to 15-16 basis points. The Q4 Dollar rebound remains at risk of reversal, with the impending US government shutdown potentially affecting Dollar sentiment. Non-voting Fed members Hammack and Logan recently indicated a preference for holding rates, revealing differing opinions on current policy.
Given the current market outlook on November 3, 2025, we are seeing the US Dollar build on its recent strength, pushing the DXY index above the 99.50 mark for the first time since August. This strength is largely a carry-over from last week’s FOMC meeting, though comments from Fed officials over the weekend have softened expectations for further rate hikes. The CME FedWatch Tool now shows that the probability of a December rate hike has fallen to just 22%, down from over 45% last week.
For derivative traders, this creates a complex environment where hedging against a potential dollar reversal is becoming crucial. While firmer US yields support the dollar for now, the reduced likelihood of another rate hike caps the upside. We saw a similar dynamic in late 2022, when the dollar index peaked before entering a sharp correction, so traders might consider buying out-of-the-money puts on the dollar or calls on oversold currencies like the euro.
Currencies And Opportunities
The divergence among other major currencies also presents opportunities, particularly in the Swiss Franc and Japanese Yen. The Franc is weak after last week’s October CPI data came in softer than expected at only 1.1% year-over-year, reinforcing a dovish central bank outlook. Meanwhile, the Yen remains vulnerable to intervention from Japanese authorities, making short-yen positions increasingly risky despite the dollar’s broad strength.
A major risk factor that must be priced into any strategy is the high probability of a US government shutdown. With the November 17th funding deadline approaching and no clear path to a resolution, a prolonged shutdown looks more likely than it has in years. This could significantly dampen risk sentiment and weigh on the dollar, suggesting that VIX call options or other volatility products could serve as a valuable hedge against domestic political turmoil.
