The U.S. dollar weakened against major currencies including the yen, euro, and Swiss franc as markets entered a busy week filled with central bank policy decisions and key U.S. economic data that could clarify the Federal Reserve’s near-term outlook.
The dollar was last down around 0.6% against the Japanese yen, trading just below the 155 level.
Yen gains as BOJ rate hike expectations grow
The yen found support as the Bank of Japan is widely expected to raise interest rates on Friday. Such a move would further strengthen the Japanese currency against a dollar that could face pressure if U.S. rate cuts come into focus early next year.
“Our economists have shifted to expecting a December rate hike from the Bank of Japan as their base case,” Goldman Sachs analysts led by Alexandra Kanter said in a note.
They added that forward guidance will be crucial for near-term market direction, noting that recent reports suggest the BoJ may place less emphasis on estimates of the neutral interest rate.
Sources cited by Reuters said the BoJ is likely to maintain its commitment to further rate increases, while stressing that the pace will depend on how the economy responds to each move.
BoE and ECB decisions in focus
The Bank of England and the European Central Bank are also scheduled to announce policy decisions this week.
Markets have largely priced in a Bank of England rate cut, as inflation shows clearer signs of easing. In contrast, the ECB is expected to keep interest rates unchanged, although traders have started to speculate that a rate hike could be possible in 2026.
Sterling was little changed at $1.33925, while the euro rose 0.21% to $1.176325, marking a fourth consecutive session of gains.
“The Bank of England decision will be very finely balanced,” said Joseph Capurso, currency strategist at Commonwealth Bank of Australia. “The risk is that this week’s inflation data could reduce expectations for follow-up rate cuts.”
UK wage growth figures are due on Tuesday, followed by consumer inflation data on Wednesday.
U.S. data under the spotlight
Investor attention is also focused on a backlog of U.S. economic data releases delayed by the recent government shutdown. The November jobs report is scheduled for Tuesday, with inflation data set for release on Thursday.
The Federal Reserve cut interest rates last week in a divided decision, though Chair Jerome Powell indicated that borrowing costs are unlikely to fall further in the near term.
U.S. President Donald Trump said on Friday that he is leaning toward either former Fed Governor Kevin Warsh or National Economic Council Director Kevin Hassett to lead the central bank next year.
The dollar slipped 0.15% to 0.795 against the Swiss franc. Meanwhile, the dollar index, which tracks the U.S. currency against a basket of peers including the euro and yen, fell 0.21%.
Elsewhere, Sweden’s Riksbank and Norway’s Norges Bank are expected to keep interest rates unchanged following their policy meetings this week.
The Swedish krona strengthened 0.28% to 9.275 per dollar, while the U.S. currency was little changed against the Norwegian krone at 10.129.
