U.S. Dollar Rises as Traders Eye Fed Policy and Government Reopening
The U.S. dollar strengthened against both the euro and Japanese yen on Wednesday as investors assessed how a flood of delayed economic data releases could influence the Federal Reserve’s interest rate policy, with lawmakers expected to vote on reopening the federal government later in the day.
The Japanese yen fell to a nine-month low against the dollar amid concerns that Japan’s new government could pressure the Bank of Japan (BOJ) to delay interest rate hikes.
U.S. Government Set to Reopen and Unlock Key Economic Data
The U.S. House of Representatives is scheduled to vote on a stopgap funding package to end the longest government shutdown in U.S. history, restarting essential programs such as food assistance, federal payrolls, and air-traffic control systems.
Once the government reopens, analysts expect an avalanche of economic reports that were postponed during the shutdown — including the crucial monthly jobs report.
“After a quiet period, we’re about to see a flood of new data, and that means a lot of potential market movement,” said Eric Theoret, FX strategist at Scotiabank.
Fed Chair Jerome Powell recently emphasized that a December rate cut is not guaranteed, as policymakers remain divided over how to handle persistent inflation. Fed funds futures currently show a 64% probability of a December rate reduction.
The U.S. dollar index — which tracks the greenback against a basket of major currencies including the yen and euro — rose 0.19% to 99.63, while the euro slipped 0.07% to $1.1572.
Meanwhile, Treasury Secretary Scott Bessent announced that Americans can expect “substantial announcements” in the coming days aimed at lowering the prices of key imports such as coffee and bananas.
Yen Hits Nine-Month Low Amid Policy Concerns
The yen weakened further after Prime Minister Sanae Takaichi expressed support for keeping interest rates low and requested close coordination with the Bank of Japan. She also asked BOJ Governor Kazuo Ueda to report regularly to the Council on Economic and Fiscal Policy.
“Markets see this as potential soft political influence,” said Theoret. “While we still expect a BOJ rate hike in December, concerns are rising it could be postponed to January.”
Japanese Finance Minister Satsuki Katayama issued a verbal warning about “one-sided and rapid” currency moves, though analysts said such warnings have limited impact without direct intervention.
The dollar gained 0.5% to 154.92 yen, briefly touching 155.04, its highest level since February 4.
Elsewhere, the British pound fell 0.43% to $1.3093, while the Australian dollar edged 0.15% higher to $0.6535 after a top official from the Reserve Bank of Australia said there is growing debate over whether the current 3.6% cash rate is sufficiently restrictive to control inflation.
In digital assets, Bitcoin rose 1.5% to $104,186, continuing its upward momentum.
