Most Asian currencies moved in a narrow to lower range, while the U.S. dollar held near a three-month high as markets scaled back expectations for a Federal Reserve rate cut in December. Strong U.S. employment data supported the dollar, although the ongoing partial government shutdown kept investors cautious toward the world’s largest economy.
Data from Japan showed wage growth rising in line with expectations and improving from the slowest pace in over a year, giving the yen some support against the dollar. The greenback slipped about 0.1% in Asian trading but remained close to its recent three month peak, buoyed by growing bets that the Fed will refrain from cutting rates, especially after Chair Jerome Powell stated that a December rate cut is “not guaranteed.”
The dollar also drew strength from upbeat economic indicators, as private sector job figures came in above forecasts, reflecting a resilient labor market, while PMI data pointed to sustained business activity at elevated levels. With the U.S. government shutdown delaying the release of official data, traders turned their focus to private indicators to gauge the economy’s momentum.
The strong data print further reduced expectations of a December rate cut. According to CME FedWatch data, the probability of a 25 basis point rate cut fell to around 59%, down from over 70% the previous day.
In Japan, the yen inched higher after data showed wages rising 1.9%, up from 1.3% in the previous month the weakest growth in a year. This improvement bolstered expectations that the Bank of Japan could move toward raising interest rates, especially as meeting minutes revealed a growing inclination among policymakers toward tightening.
Elsewhere in Asia, currencies saw limited movement amid a firm dollar. The Australian dollar held steady despite strong export and trade balance data, while the Chinese yuan was unchanged even as the People’s Bank of China set a slightly stronger midpoint rate. The dollar slipped 0.1% against the Singapore dollar, while it gained about 0.2% versus the Taiwan dollar.
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