The yen languished near an 8.5-month low, pressured by wide interest rate differentials between the US and Japan.
Trading in Asia was thinned on Monday due to a holiday in Japan, leaving currencies largely within range, although most were near recent lows against a strong dollar.
The euro fell to a three-month low and last traded at $1.1527. Sterling fell 0.26% to $1.3136 ahead of the Bank of England’s interest rate decision this week; the central bank is expected to hold firm.
While the ongoing US government shutdown is expected to delay the release of the non-farm payrolls report on Friday, investors will have their eyes on other news, including ADP employment data and ISM PMIs this week, for a pulse on the economy.
“The lack of information is adding to the calm in the markets,” said Rodrigo Catril, senior currency strategist at National Australia Bank. “And for now, I think what could break that, with the shutdown still going on, is a big downside surprise or even upside surprise in terms of surveys or private data releases.” “But otherwise, even this private data doesn’t scream or tell us right now that the Fed needs to hurry.” Last week, the Fed cut rates by 25 basis points as expected, but Chairman Jerome Powell signaled that this could be the central bank’s last cut for the year, citing the risk of additional steps without a more robust picture of the economy.
A number of Fed bank governors also expressed discomfort Friday with the decision to ease policy.
Traders have since lowered their expectations for a December cut and now estimate about a 68% chance of a move.
Against a basket of currencies, the dollar rose slightly to 99.82, near its strongest level since August.
Elsewhere, the yen was recently 0.1% weaker at 154.15 per dollar as it struggled to make progress against its peers.
Against the euro, the Japanese currency similarly recorded a record low of 177.68.
Although Bank of Japan Governor Kazuo Ueda last week gave the strongest signal yet that a rate hike was possible as early as December, markets remained impressed with the central bank’s gradual approach, especially given that the Fed has become more aggressive.
That has increased pressure on the yen, leading Japanese authorities to halt the currency’s decline.
“As we move towards 155, you would think that those comments would become a little bit louder and even the risk of some intervention would increase,” Catril said. “But in any case, it is an example and yet another argument to suggest that the BOJ cannot wait much longer.”
The New Zealand dollar was not far off a 6.5-month low and last traded at $0.5721. The Aussie cut 0.05% to $0.6544 on Tuesday, ahead of the Reserve Bank of Australia’s interest rate decision.
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