Dollar rises as US plans to reopen, yen at nine-month low

U.S. Dollar Rises Against Euro and Yen Amid Economic Data Assessment

The U.S. dollar gained ground against both the euro and yen on Wednesday. This movement came as traders evaluated how a flurry of economic data would influence the Federal Reserve’s interest rate policies, especially with the anticipated government reopening.

In parallel, the Japanese yen hit a nine-month low versus the dollar, raising worries that Japan’s new government might push the central bank to postpone interest rate hikes.

On the legislative front, the U.S. House of Representatives is set to vote on a stopgap funding package aimed at reinstating suspended food aid, compensating numerous federal workers, and revitalizing a struggling air traffic control system. This effort seeks to bring an end to what has become the longest government shutdown in U.S. history.

The reopening is expected to unleash a torrent of economic indicators that were previously delayed due to the shutdown, which includes the closely watched monthly employment figures.

“There’s a lot of potential for movement as new data comes in after this quiet stretch,” noted Eric Theoret, a foreign exchange strategist at Scotiabank.

Federal Reserve Chairman Jerome Powell indicated last month that a rate cut wasn’t guaranteed at the central bank’s meeting in December, with policymakers showing division regarding whether to pursue an accommodating stance given the ongoing inflation concerns.

Traders of federal funds futures are currently estimating a 64% probability of a rate cut in December.

The dollar index, which gauges the greenback against various currencies, including the yen and euro, increased by 0.19% to 99.63. Meanwhile, the euro dipped by 0.07% to $1.1572.

U.S. Treasury Secretary Scott Bessent announced Wednesday that “substantive announcements” aimed at lowering prices for non-U.S. grown items like coffee and bananas will be made in the coming days.

The yen faced declines after Prime Minister Sanae Takaichi expressed a desire to maintain low interest rates and emphasized the need for closer cooperation with the Bank of Japan. He also requested Bank of Japan Governor Kazuo Ueda to make regular reports to the government’s Economic and Fiscal Policy Council.

“The market seems to interpret this as a kind of soft impact,” Theoret added. “While we still anticipate that the Bank of Japan will raise rates in December, there’s an increasing worry that this could get pushed back to January.”

Meanwhile, Japan’s Finance Minister Satsuki Katayama issued further warnings regarding the yen’s depreciation, pointing to “unilateral and rapid movements in the foreign exchange market.”

“Verbal interventions don’t have the same effect they once did,” according to Mohammad Al-Salaf, a foreign exchange strategist at Danske Bank. “For Japanese authorities to genuinely strengthen the yen, serious interventions may be needed, and that could happen in the months ahead.”

Against the Japanese yen, the dollar rose by 0.5% to $154.92, briefly reaching $155.04, its highest level since February 4.

The British pound fell by 0.43% to $1.3093, while the Australian dollar gained 0.15% to $0.6535.

A senior official at the Australian central bank remarked on Wednesday that there is an increasing debate over whether the current cash rate of 3.6% is sufficiently restrictive to control inflation, highlighting the importance of this issue for future policy.