The dollar lost further ground against the Japanese yen after US Treasury Secretary Scott Bessent indicated the new Japanese government is open to interest rate hikes by the Bank of Japan ahead of a policy decision on Thursday.
The Australian dollar reversed an earlier small decline to rise 0.3% to $0.6604 after higher-than-expected consumer price data raised doubts about a central bank rate cut next week.
“The focus is on the guidance given by Fed Chairman Jerome Powell during his press conference,” said Kyle Rodda, an analyst at Capital.com. “There is a lot of easing in the curve, almost completely discounting a rate cut in December,” he said. “Anything that disrupts pricing can lead to volatility.”
Currency traders are also closely watching a planned meeting between US President Donald Trump and his Chinese counterpart Xi Jinping in South Korea on Thursday to decide on a framework that could pause tougher US tariffs and China’s rare earth export restrictions.
The US dollar index, which measures the currency against six rivals, was steady at 98.681 after falling 0.1% on Tuesday for a second straight day of declines. The dollar fell 0.2% to 151.84 yen, falling for a second day after Bessent posted on Bessent, who is in Japan with Trump for talks with Prime Minister Sanae Takaichi’s newly formed government, has repeatedly criticized the BOJ for the slow pace of rate hikes.
Takaichi, seen as a fiscal and monetary dove, has asked the BOJ to maintain an accommodative monetary environment but has said the conduct of monetary policy is up to the central bank.
The BOJ is expected to hold rates steady when it concludes its two-day meeting on Thursday, and the focus will be on any clues about the potential for a rate hike at its next meeting in December.
Meanwhile, the Fed is widely expected to cut rates by a quarter of a percentage point later on Wednesday, and traders will be looking for clues as to whether the market’s high expectations for a December cut are justified.
The European Central Bank will also determine policy on Thursday and is expected to leave interest rates unchanged.
The euro was little changed at $1.1655. Sterling added 0.1% to $1.3278.
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