The yen strengthened on Tuesday in Asian trading, rebounding from its weakest level against the U.S. dollar in more than nine months. The shift came as expectations for a Federal Reserve rate cut next month eased, triggering a broad risk-off move across global markets.
The U.S. dollar fell 0.3% against the yen to 154.885, pressured by declines across equities, gold, and bitcoin as investors sought safer assets. Gold, typically a reliable safe haven, also came under pressure as investors scaled back expectations of an imminent Fed rate cut.
Analysts at DBS noted that while the yen remains below the key 155 threshold, risks of heightened volatility and potential currency intervention have increased. Later on Tuesday, Japanese Prime Minister Sanae Takaichi is scheduled to meet Bank of Japan Governor Kazuo Ueda. Takaichi, known for supporting aggressive fiscal and monetary stimulus, has appointed policymakers favoring large spending and low interest rates—factors that typically weigh on the yen.
Concerns about Japan’s fiscal stance grew after Goushi Kataoka, a member of a key government advisory panel, told Reuters that Japan should issue a stimulus package worth 23 trillion yen. This potential package is far larger than the 17 trillion yen previously reported and has raised worries about the debt supply that bond markets will need to absorb.
Japanese government bond yields rose further, steepening the yield curve, with 20-year yields reaching their highest level in 26 years.
The yen’s recent decline prompted Finance Minister Satsuki Katayama to voice concern about rapid, one-sided currency movements. She warned that these swings pose economic risks and need close monitoring. Earlier in the session, the yen had touched 155.37, its weakest level since February.
Expectations for a December Fed rate cut have weakened. According to CME’s FedWatch tool, futures now imply a 43% chance of a 25-basis-point cut, down sharply from 62% a week earlier. Analysts at ING said a pause in December would likely be temporary, with upcoming economic data—especially labor market indicators—playing a decisive role.
The U.S. dollar index slipped 0.1% to 99.448, resuming a broader downtrend. Safe-haven flows also supported the Swiss franc, which gained 0.2% against the dollar.
U.S. bond yields moved lower as well. The two-year Treasury yield fell to 3.5745%, while the 10-year yield declined to 4.1095%. The euro edged up 0.1% to $1.1599, ending a three-day slide.
In Asia-Pacific currencies, the Australian dollar dropped 0.2% to $0.64785 after the Reserve Bank of Australia’s meeting minutes suggested uncertainty about whether current rates remain restrictive. The British pound held steady at $1.3157, and the New Zealand dollar eased 0.1% to $0.56475.
