The dollar held near a three-month high as robust U.S. private economic data and Federal Reserve Chair Powell's remarks significantly reduced market expectations for a December rate cut, with probabilities dropping to 59.3%. Concurrently, the Japanese yen strengthened on better-than-expected September wage growth of 1.9%, reinforcing the likelihood of a Bank of Japan rate hike as early as December. Broader Asian currencies largely traded in a flat-to-low range against the stronger dollar.
The U.S. dollar maintained its strength near a three-month high, driven by robust private economic data and reduced expectations for a Federal Reserve rate cut in December. Stronger-than-expected October ADP nonfarm employment and resilient U.S. business activity, as indicated by PMI data, underscored a robust labor market. Consequently, market probabilities for a 25 basis point rate cut in December declined to 59.3% from 70.3% a day prior, further supported by Chair Powell's cautionary remarks. Conversely, the Japanese yen found support, with the USD/JPY pair falling 0.2%, following better-than-expected September wage growth of 1.9%, a significant improvement from August's 1.3%. This data, coupled with recent Bank of Japan (BOJ) minutes indicating policymakers' inclination towards a rate hike in the coming months, strengthens the case for a potential BOJ rate increase as early as December. Broader Asian currencies generally traded in a flat-to-low range against the backdrop of a stronger dollar. While Australia's strong export and trade balance data for September garnered limited reaction, the ongoing 36-day U.S. government shutdown continues to introduce uncertainty, forcing traders to rely heavily on private economic indicators for market cues.
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moderately positive
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