GTJA research reports indicate that the USD index has broken through 104, with a cumulative increase of nearly 4% since October and rising for the fourth consecutive week. The strong position of the USD is mainly supported by four main factors: the continuous resilience of the US economy, with September retail sales, employment, and inflation data all exceeding expectations, weakening the possibility of a significant interest rate cut by the Federal Reserve this year; the continuous rise in US bond yields supporting the strength of the USD; various non-US central banks releasing dovish signals, with the ECB hinting at accelerating rate cuts, the Reserve Bank of New Zealand has already cut rates by 50 basis points, and clear differences in monetary policies; the factors surrounding the US presidential election, with Trump leading in key swing state polls, signaling market pricing for a re-inflation and trade protection restart. After the election, the trends of the USD and US bonds will become clearer.

The resilience of the US economy is a key factor in the USD maintaining its strength, as shown by the Citi Economic Surprise Index reflecting recent improvements in US economic data. Better-than-expected US economic data supports the rise of the USD index and US 10-year Treasury yields. US retail sales in September increased by 0.4% month-on-month, beating expectations, while core retail sales rose by 0.5% month-on-month, indicating strong consumer demand. The stable job market combined with unexpected inflation has raised concerns in the market about 'no landing and re-inflation'.

Increased short interest in US bonds, with yields surpassing 4.2%, supporting the rise of the USD, mainly due to high deficit pressure and better-than-expected economic data driving the USD higher. In fiscal year 2024, the US deficit reached $1.828 trillion, the third highest in history, with a projected annual deficit rate of 6.3%. At the same time, hedge funds' short positions in US bonds have risen, with short positions in 2-year and 10-year Treasury bonds exceeding $550 billion and $210 billion respectively, reaching historical highs. We believe that a significant fiscal deficit and a resilient economy will support US bond yields at high levels, but caution is needed as geopolitical risks may temporarily suppress safe-haven demand.

Major non-US currencies generally weakened, with central bank policy divergence intensifying, favoring the accumulation of long positions in the USD. The yen broke through 152.50 to a three-month high, with BOJ Governor Ueda remaining cautious about rate hikes; the euro fell below 1.08 to a 16-week low, with ECB President Lagarde hinting that inflation may reach targets by early 2025 and expectations for a rate cut in December rising; the pound dropped below 1.29, with BoE Governor Bailey expressing doubts about structural changes in the economy and an increased probability of a rate cut in November; the Australian dollar touched 0.65 before a slight rebound, but with increased expectations for a rate cut, the timing of the cut is likely to be brought forward. Against the backdrop of a stronger USD, rising US bond yields, and increased uncertainty in various countries' monetary policies, non-US currencies continue to show weakness.