Dollar rises against yen and Aussie as focus turns to upcoming US data
The U.S. dollar rose against the safe-haven yen and versus the growth-sensitive Australian dollar on Tuesday as investors grew more cautious on risk and shifted their focus to data expected once the U.S. government shutdown ends.
In early Asian trade, the yen touched its weakest level since February, while the risk-sensitive Australian currency held firm against the greenback.
In recent days, risk-sensitive currencies such as the Australian dollar and British pound have gained, while safe-haven currencies like the yen have softened as hopes for a quick end to the U.S. government shutdown boosted appetite for risk.
Market participants expect the U.S. closure to end in the next few days after the U.S. Senate on Monday approved a compromise that would restore funding for federal agencies and would stall President Donald Trump’s campaign to downsize the federal workforce.
FACTORING IN AN END TO THE SHUTDOWN
A strong run of economic indicators will help clarify the outlook for the U.S. economy and the Federal Reserve policy path.
“Our expectation is that the economy is holding up nicely, and inflation is passing through in a quite moderate way,” said Isabelle Mateos y Lago, group chief economist BNP Paribas, arguing that this scenario should allow the Fed to cut by 25 basis points in December and then be more cautious going into 2026.
“Our reading of the economy is we’re still in this low-hire, low-fire mode, with no great signs of stress. But let’s see what the data says,” she added.
The deal to end the shutdown now heads to the House, where Speaker Mike Johnson has said he would like to pass it as soon as Wednesday and send it on to President Donald Trump to sign into law.
"There will be little sense of direction in the coming days: reopening prospects allow markets to price out the negative growth impact, but a resumption of data releases in the U.S. does carry non-negligible downside risks to the dollar," said Francesco Pesole, forex strategist at ING.
"We think markets are underestimating the downside risks for the labour market, U.S. front-end rates and, by extension, the dollar into year-end," he added.
The euro was roughly unchanged at $1.1555.
"The bottom line is that the end of the government shutdown will help avoid a more severe gross domestic product and corporate earnings slowdown," said Thierry Wizman, global forex and rates strategist at Macquarie Group.
STERLING DIPS, YEN UNDER PRESSURE
Sterling fell 0.40% to $1.3126 after data showed Britain’s labour market cooled noticeably in the third quarter.
The dollar rose 0.10% to 154.28 against the yen, after hitting 154.495, the highest level since February.
The yen was under pressure after Japan’s new Prime Minister Sanae Takaichi called for policymakers to go slow on interest rate hikes at the same time as U.S. policymakers have turned cautious on further cuts.
The greenback dropped 0.25% to 0.6520 against the Australian dollar, snapping a two-day rising streak.
The Swiss Franc was on track for its fourth straight daily rise after Trump said the U.S. was working with Switzerland on a deal to lower the 39% tariff rate.
The Swiss currency was up 0.15% to 0.8035.
Source : Reuters.com
