On Monday, the dollar initiated the final quarter of the year on a strong note, thanks to the prospect of sustained higher U.S. rates providing solid support. This push has driven the Japanese yen closer to 150 mark.
Currency markets displayed subdued movements in early Asian trading due to public holidays in parts of Australia and China’s Golden Week. Nevertheless, some relief could be expected in markets following the narrowly avoided U.S. government shutdown.
Yen at an 11-Month Low
The yen slid to an approximately 11-month low of 149.74 per dollar, continuing its gradual decline towards the psychologically significant 150 level. Many analysts see the 150 mark as a potential trigger for Japanese authorities to intervene in the currency market, as they did last year.
Olivier d’Assier, Head of Applied Research for APAC at Axioma, noted, “Fear of intervention by the BOJ above the 146 level has come and gone, and the currency is now above 148 to the dollar, with the BOJ remaining absent from currency markets.”
A summary of opinions from the Bank of Japan’s (BOJ) September meeting, released on Monday, indicated that policymakers discussed various factors to consider when exiting ultra-loose monetary policies. The BOJ remains cautious about tightening too early, as this could stifle the rise in inflation and economic growth.
Euro and Sterling Under Pressure
In the broader currency market, the euro declined by 0.07% to $1.0565, following a 3% drop in the previous quarter, marking its worst performance in a year. Sterling also weakened, down 0.13% to $1.2188, having experienced a nearly 4% slide against the dollar in the third quarter.
Conversely, the U.S. dollar index remained close to its recent 10-month high, at 106.24. It recorded its strongest quarterly performance in a year last month, largely due to consistently hawkish Federal Reserve commentary.
Jarrod Kerr, Chief Economist at Kiwibank, expressed a preference for the dollar, stating, “I’d rather be in dollars at the moment than euros or pounds or others. I think the dollar will find a bit more support.”
U.S. Government Shutdown Averted
Over the weekend, the U.S. Congress passed a stopgap funding bill with significant Democratic support, preventing the fourth partial government shutdown in the past decade. Chris Weston, Head of Research at Pepperstone, noted that this development “should be welcomed by risky assets.” Furthermore, the U.S.
Labor Department is set to release nonfarm payrolls data this week, as well as the U.S. Consumer Price Index (CPI) report in October. This suggests that the November Federal Open Market Committee (FOMC) meeting could become a potential venue for another 25-basis-point rate hike.