The U.S. dollar started December on weaker footing as investors prepared for a crucial month. Markets are watching for what could be the final Federal Reserve rate cut of the year, along with the possible confirmation of a more dovish successor to Fed Chair Jerome Powell.
In Asia, attention turned to a speech by Bank of Japan Governor Kazuo Ueda. Traders looked for clues on whether the BOJ might raise rates later this month to slow the yen’s recent decline.
Foreign exchange trading returned to normal on Monday after last week’s extended outage at CME Group, which had disrupted activity across global markets. Currency moves were mostly subdued as traders awaited key economic data and major events throughout December.
The yen strengthened further after data showed Japanese corporate spending on factories and equipment rose 2.9% in July–September from the previous year. The increase suggested Japan’s economy is absorbing U.S. tariff pressure more effectively than expected.
The yen last traded 0.2% higher at 155.84 per dollar, off the 10-month low of 157.90 hit in November that had heightened concerns about potential intervention by Japanese authorities. Finance Minister Satsuki Katayama said over the weekend that recent sharp currency swings were “clearly not driven by fundamentals.”
Carol Kong, a currency strategist at Commonwealth Bank of Australia, said she expects Ueda’s speech to guide markets on near-term policy. She noted that recent comments from BOJ officials, combined with the yen’s weakness, make a December rate hike increasingly likely.
Despite the yen’s recent rebound, it remains only 0.9% stronger for the year and still trades near multi-month lows against both the euro and the British pound.
Elsewhere, the euro rose slightly against the weaker dollar, edging up 0.02% to $1.1600.
The British pound held steady at $1.3240 after posting its best weekly performance in more than three months following the release of the long-anticipated U.K. budget.
The main focus, however, remained on the outlook for U.S. interest rates. Markets now assign an 87% probability of a 25-basis-point cut at next week’s Fed meeting, according to CME’s FedWatch tool.
The sharp shift in expectations, combined with reports that White House economic adviser Kevin Hassett is the leading candidate to replace Powell, weighed heavily on the dollar. The currency recorded its worst week in four months on Friday. Treasury Secretary Scott Bessent said President Donald Trump may announce his nominee before Christmas.
The dollar index edged slightly lower to 99.42 on Monday as it struggled to recover recent losses. The Australian dollar slipped 0.08% to $0.6543, while the New Zealand dollar fell 0.09% to $0.5733.
Goldman Sachs economists said the market will now begin focusing on rate expectations for early 2026. They noted that policy division within the Fed is limiting more aggressive pricing for cuts, but incoming labor data before the January meeting could shift sentiment further.
The U.S. employment report for November, due on December 16, will include October nonfarm payrolls but will not contain the unemployment rate due to data gaps from the prolonged government shutdown.
In cryptocurrencies, bitcoin fell 3.6% to $87,881.82, while ether dropped 5% to $2,871.59.
