The dollar index hit a new four-year high of 86.218

Good Morning,

- The dollar strengthened above 110 yen for the first time since August 2008.

- The greenback rose versus most of its 16 major counterparts amid speculation an improving economy will give the FED more reason to increase interest rates sooner than previous estimate. The dollar index hit a new four-year high of 86.218.

- The euro trade on defense mode on Wednesday after hit a fresh two-year trough yesterday. Data showed euro zone annual inflation cooled to 0.3 percent in September from 0.4 percent, intensifying the case for the ECB to offer more stimulus. The common currency fell as far as $1.2570 before managing a bounce above to $1.26 level. The euro lost 3.82 percent in September - its biggest decline in over two years.

- IMF figures released yesterday showed the proportion of euro holdings in allocated official reserves dropped by 3.5 percent, the biggest decline since the first quarter of 2009. The euro’s share stood at 24.2 percent in the second quarter from 25 percent in the prior three months, while the dollar’s rose to 60.7 percent from 60.3 percent.

- The ECB is forecast to hold interest rates at its meeting tomorrow, according to analysts surveyed by Bloomberg News, after unexpectedly dropping them to records Sept. 4. Still, Draghi said Sept. 22 policy makers “stand ready to use additional unconventional instruments” if necessary.

- RBS on EUR/USD: The EUR continues to slide into the ECB meeting on Thursday, core-inflation was reported to be down to 0.7%y/y in September revisiting the lows hit several times since December last year, notes RBS. "Eurozone swap rates continue to slip to new lows, continuing to heap pressure on the EUR with an increasing yield disadvantage across the yield curve," RBS adds. "The EUR is trading below significant low points made in 2013 and 2012 on the shoulders of its 2012 crisis low. It may encounter some psychological support at 1.25, but it seems futile picking lows in the EUR. The yield spreads could argue for a fall to new lows," RBS argues. "We think holding EUR shorts remains a primary place to retain a long USD position, with EUR still not cheap, increasingly negative yield spreads and as key supports are brushed aside," RBS advises.

- Japanese government spokesman: The weak yen needed to be monitored.

- China's manufacturing activity stayed steady in September, with the official Purchasing Managers' Index (PMI) coming in at 51.1, unchanged from August.

- Australia’s dollar slid to an eight-month low after retail sales grew less than economists forecast. The Aussie slid versus most of its 16 major peers after the statistics bureau said retail sales grew 0.1 percent in August, compared with the median forecast for a 0.4 percent advance. The Aussie fell to 86.63, the weakest since Jan. 24.

- Home prices in Australia's capitals rose only marginally in September, slowing after three straight months of strong gains, with five of eight cities recording falls in the month. The slowdown should actually be welcomed by the RBA which recently has become concerned that a surge in borrowing to buy investment properties could lift prices to unsustainable levels.

- OPEC's oil supply jumped to its highest in almost two years in September, due to further recovery in Libya and higher output from Saudi Arabia and other Gulf producers.

- Watch today: UK manufacturing, US jobs, US ISM Index.

Have a nice Day !