The Japanese yen strengthened sharply while the U.S. dollar rebounded from a two-month low during Asian trading on Tuesday, as rising market volatility pushed investors toward safe-haven assets. The cautious mood came ahead of delayed U.S. employment data and a packed week of central bank policy decisions.
Yen gains ahead of Bank of Japan decision
The yen climbed around 0.3% to 154.735 per dollar, as traders positioned for the Bank of Japan’s policy meeting on Friday. Markets widely expect the BOJ to raise interest rates by 25 basis points, which would take its benchmark rate to 0.75%.
Market confidence around a BOJ rate hike remains firm, according to Christopher Wong, currency strategist at OCBC in Singapore. He noted that while recent sell-offs in U.S. technology stocks and Asian equities dampened sentiment, the impact on currency markets has been relatively contained.
Dollar stabilizes ahead of key U.S. jobs data
The dollar index, which tracks the greenback against six major peers, edged up to 98.256 after earlier hovering near its lowest level since mid-October. The modest rebound comes as investors await crucial U.S. economic data for clarity on the outlook for monetary policy.
Later on Tuesday, the Bureau of Labor Statistics is set to release combined employment reports for October and November. The data had been delayed due to disruptions caused by the longest U.S. government shutdown on record. Several preliminary manufacturing indicators are also scheduled for release.
Analysts say the jobs data could shed light on labor market conditions during the shutdown period. However, uncertainty remains over whether the figures will fully capture delayed job losses. Some economists have warned that layoffs postponed during the shutdown may still distort the numbers.
Markets are currently pricing in a 75.6% probability that the Federal Reserve will hold interest rates steady at its next meeting in late January, according to futures data.
Yuan firms as policymakers guide currency higher
China’s offshore yuan strengthened modestly to 7.0381 per dollar, marking its strongest level since early October. Analysts view the move as a controlled effort by policymakers to allow gradual appreciation while maintaining currency stability.
Attention remains on whether Chinese authorities will attempt to slow the pace of gains through daily reference rate settings.
Central bank decisions dominate global outlook
Investors are also bracing for several other major central bank decisions this week. The Bank of England is widely expected to cut interest rates by 25 basis points, while the European Central Bank, Sweden’s Riksbank, and Norway’s Norges Bank are all anticipated to leave policy unchanged.
The euro held steady near $1.1751, supported by progress in peace talks aimed at ending the war in Ukraine. The British pound edged slightly lower to $1.3368.
Commodity-linked and crypto currencies mixed
The Australian dollar slipped marginally to $0.6635, little changed after a private survey showed a decline in consumer sentiment during December. The New Zealand dollar also weakened, as expectations for future rate hikes eased and government budget updates pointed to slightly lower bond issuance.
Cryptocurrency markets were volatile, fluctuating between gains and losses following Monday’s pullback. Bitcoin fell around 0.7% to $85,620, while ether declined roughly 1.1% to $2,912.
