Yen Hits Nine-Month Low as Traders Anticipate December Fed Cut
The Japanese yen slid to a nine-month low on Wednesday, prompting renewed warnings from Japanese officials seeking to stem the currency’s decline. Meanwhile, the U.S. dollar remained cautious after private-sector employment data reignited concerns about a weakening U.S. labour market and increased speculation over a possible Federal Reserve rate cut in December.
The yen briefly hit 154.79 per dollar in Asian trading—its weakest level since February—before slightly recovering after comments from Finance Minister Satsuki Katayama. Katayama acknowledged that the negative effects of a weak yen on Japan’s economy had become more significant than its benefits.
“Markets and Katayama are both drawing a line at 155,” noted Shoki Omori, Chief Desk Strategist at Mizuho Securities, suggesting that any move beyond that level could trigger stronger verbal intervention. However, he cautioned that the more officials intervene verbally, the less effective their comments become over time.
The yen has already fallen 0.8% this week, pressured by risk-on sentiment amid optimism surrounding an end to the U.S. government shutdown and expectations of greater fiscal spending under Prime Minister Sanae Takaichi. Takaichi has called on the Bank of Japan to maintain policies that achieve the 2% inflation target through wage growth, not higher import costs. She also signaled plans for a multi-year fiscal framework that allows more flexible spending, potentially easing Japan’s fiscal constraints.
Elsewhere, the euro climbed 0.3% to a record 179.14 yen, while sterling rose 0.26% to 203.11 yen, highlighting broad weakness in Japan’s currency.
U.S. Labour Data Fuels Rate Cut Speculation
In the broader market, the dollar rebounded slightly as it recovered from earlier losses, supported in part by a weaker yen. Data from ADP showed that U.S. firms shed over 11,000 jobs a week through late October, signaling a slowdown in hiring and reinforcing expectations of monetary easing by the Fed.
The dollar index rose 0.1% to 99.54, while sterling edged down to $1.3138 and the euro held steady at $1.1579. Market participants now price in a 64% chance of a 25-basis-point Fed rate cut in December, pending confirmation once the U.S. government reopens and delayed economic data is released.
According to Brian Martin, Head of G3 Economics at ANZ, “The balance of risks to the labour market, inflation, and consumption favors a 25-basis-point rate cut next month.”
In the Asia-Pacific region, the Australian dollar rose 0.12% to $0.6536, while the New Zealand dollar remained little changed at $0.5655. An Australian central bank official added that debate is growing over whether the current 3.6% cash rate is sufficiently restrictive to control inflation, signaling that monetary policy discussions are intensifying.
