The U.S. dollar moved toward a weekly decline on Friday as traders reduced their positions while waiting for a backlog of economic data to be released after the government reopened.
The greenback weakened even as U.S. bond yields rose and expectations for a Federal Reserve rate cut in December diminished. A broad selloff in U.S. stocks and bonds carried over into Asian markets, adding pressure to currency sentiment.
“There’s a whiff of ‘sell America’ back in the air,” said Ray Attrill, head of FX research at National Australia Bank (NAB).
More Federal Reserve officials signaled caution about further rate cuts, pointing to ongoing inflation risks and signs of a stable labor market. Still, this slightly more hawkish tone failed to support the dollar. It slipped to a two-week low against the euro, which moved back above $1.16 and traded 0.1% higher at $1.1644.
The Swiss franc also held near a three-week high at 0.7919 per dollar. Against a basket of currencies, the dollar hovered near a two-week low at 99.14, putting the dollar index on track for a 0.4% weekly loss.
Joseph Capurso, head of international and geoeconomics at Commonwealth Bank of Australia, said markets were now preparing for a wave of U.S. economic releases next week, which he expects to show significant weakness. He added that the lack of complete data—especially the October unemployment rate, which may never be released—could explain why expectations for aggressive rate cuts have not increased.
“When you’re in the fog, you drive slower… when you don’t know what’s going on in the economy, maybe you slow down your cuts,” Capurso said.
Markets are currently pricing in slightly more than a 50% chance of a 25-basis-point cut in December, while expectations for a January cut are nearly fully priced in. Projections for 2026 rate levels have barely shifted.
Busy Session for Asia FX
Asian currency markets saw sharp movements. The British pound slid 0.3% to $1.3152 after failing to hold gains from the previous session. The decline followed a Financial Times report that Prime Minister Keir Starmer and Finance Minister Rachel Reeves scrapped plans to raise income taxes ahead of the November 26 budget.
NAB’s Attrill noted that while milder fiscal tightening could support the economy, foreign investors may worry about the long-term budget outlook, explaining the pound’s immediate drop.
The South Korean won strengthened 1% after officials signaled possible intervention to stabilize the weakening currency. The yen also found limited support from the dollar’s retreat but stayed near a nine-month low, firming slightly to 154.51 per dollar and remaining set for a 0.7% weekly decline.
The Australian dollar edged up 0.11% to $0.6538 after sliding earlier due to risk-off sentiment. The New Zealand dollar rose 0.6% to $0.5687, supported by better-than-expected manufacturing data and news that the Reserve Bank of New Zealand will ease mortgage loan-to-value restrictions starting December 1.
In China, the onshore yuan hit its strongest level in more than a year at 7.0908 per dollar, with traders citing increased dollar-selling by exporters after the currency broke through a key threshold.
Fresh data showed China’s industrial output and retail sales grew at their slowest pace in over a year in October, while new home prices recorded their sharpest monthly drop in a year.
