The U.S. dollar held close to a three-month high on Monday as investors awaited key data releases this week to assess the health of the U.S. economy and evaluate whether the results might influence the Federal Reserve’s hawkish stance.
The Japanese yen remained near an eight-and-a-half-month low, pressured by the wide interest rate gap between the United States and Japan.
With Japan’s markets closed for a holiday, Asian trading was thin, keeping most currencies rangebound. However, most major currencies stayed pinned near recent lows against the strong dollar.
The euro slipped to a three-month trough, trading last at $1.1536, while the British pound fell 0.19% to $1.3145 ahead of the Bank of England’s policy meeting this week. Analysts expect the central bank to hold interest rates steady.
Sterling also faced additional pressure from political tensions surrounding Finance Minister Rachel Reeves, as investors worried about the potential effects of her upcoming November budget on businesses, households, and overall economic growth.
Although the ongoing U.S. government shutdown is expected to delay Friday’s nonfarm payrolls report, traders will still watch other indicators, including ADP employment data and ISM PMI figures, to get a clearer picture of economic momentum.
“The lack of new information is keeping markets calm for now,” said Rodrigo Catril, senior FX strategist at National Australia Bank. “What could shake that calm are big surprises—either upward or downward—in private data releases.”
He added that even private reports so far show no urgent reason for the Federal Reserve to adjust policy quickly.
Last week, the Fed cut interest rates by 25 basis points as expected, but Chair Jerome Powell suggested it may be the final cut of the year, citing uncertainty about the economic outlook. Several Fed officials expressed discomfort with the move, suggesting internal divisions about the pace of easing.
Following those comments, market expectations for a December rate cut have decreased, with traders now seeing roughly a 68% chance of another move.
The U.S. dollar index held steady at 99.73, close to its strongest level since August.
Meanwhile, the yen weakened 0.1% to 154.10 per dollar, hovering near record lows against the euro at 177.86.
Despite Bank of Japan Governor Kazuo Ueda signaling a possible rate hike in December, investors remain skeptical due to the central bank’s gradual stance. That caution has intensified pressure on the yen and prompted warnings from Japanese authorities about potential currency intervention.
“If the yen moves toward 155, intervention risks rise,” Catril added. “This situation increases the urgency for the BOJ to act soon.”
In the Pacific region, the New Zealand dollar traded near a six-and-a-half-month low at $0.5730, while the Australian dollar edged up 0.2% to $0.6566. The Aussie gained slight support from expectations that the Reserve Bank of Australia will keep rates unchanged on Tuesday after stubbornly high core inflation readings.
