A flash reading of U.S. business activity for September came in at its strongest pace in more than five years, according to survey data cited by Seeking Alpha. The number reinforced the view that the American economy is running hot even as the Federal Reserve weighs further rate moves, and it pushed the dollar to a two-month high against a basket of currencies.
The move rippled into Asian markets. Japanese 10-year government bond yields jumped to a 30-year high on bets that the Bank of Japan will raise interest rates again, while the yen held near its recent lows against the dollar. Other Asian currencies traded mixed as traders weighed the diverging paths of the Fed and Asian central banks.
What remains unresolved is whether the PMI strength holds up in the final GDP data due later this year, or whether it proves to be a one-month blip. A hotter reading raises the odds the Fed holds rates steady for longer, which is why traders bid up the dollar rather than sold it.