GLOBAL MARKETS
The fortunes of the euro, trading not far off its lowest levels of the year against ?the dollar, are in the grip of a global energy shock and growing political risk in Europe. The euro was heading towards $1.20 in August, but has fallen around 2% this month to two-month lows of just below $1.14 . While a US rate rise that has restored the Fed's inflation-fighting credentials has bolstered the dollar, the euro's outlook has also been muddied by politics and a renewed rise in oil prices that could hurt an economy that has held up ?better than expected. Australia's central bank raised its cash rate to ?a 15-year high of 4.60% on Tuesday in its fourth hike of the year, saying inflation was ?too high and it ?was prepared to hike further if ?needed. Wrapping up its September ?policy meeting, the Reserve Bank of ?Australia board voted unanimously to lift rates by 25 basis points, bringing the ?tightening this year to ?a full percentage point. The board said some ?of the upside risks to inflation were materialising with energy costs high and productivity weak at ?home. Oil prices and bond ?yields rose in an uncomfortable combination for stocks on Tuesday, as investors braced for an era where short-term borrowing costs settle at their highest levels in years. Australia raised its cash rate to a 15-year high, as expected, and market participants have bet on it going higher still. The benchmark 10-year US ?Treasury yield spiked to a 19-year high above 5.27% on Monday for a rise of nearly 50 basis points ?through September. Yields rise when bond prices fall and the monthly selloff is the heaviest for two years. Sovereign yields are an anchor for global markets, ?a reference price for investing in riskier stocks and a benchmark for mortgages and corporate borrowing. Higher rates mean ?pressure on government, corporate and household budgets.
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