Bitcoin Reaches One-Month High as Yen Continues Decline, Reports Reuters

SINGAPORE (Reuters) – Bitcoin stood out as it approached one-month highs on Monday, continuing its rally following the Federal Reserve’s substantial rate cut last week. Meanwhile, the yen continued to decline amid a market slowdown due to a Japanese holiday.

The dollar gained strength against the yen last week after meetings of monetary policy in the United States and Japan, reaching its peak in two weeks at 144.50 yen, and was around 144.16 yen on Monday.

The Bank of Japan (BOJ) opted to keep interest rates steady last week and signaled that it is not in a rush to raise rates. This decision came shortly after the Fed’s 50 basis points (bps) rate reduction, halting the yen’s aggressive appreciation this month. The currency has risen 1.4% in September.

With Japan observing Autumnal Equinox Day, market activity was primarily influenced by expectations around further Fed rate cuts, which have fueled gains in equities, commodity currencies, and other risk assets.

Bitcoin surged 1.8% to $63,954, nearing its one-month peak. Ether also climbed 3% to $2,660.30, its highest level since late August.

Chris Weston, head of research at Pepperstone, noted that the favorable macroeconomic environment is a crucial factor driving Bitcoin’s momentum. He stated, "Currently, this is a rally worth pursuing. Historically, Bitcoin rallies have shown powerful trends, and the fear of missing out (FOMO) tends to energize crypto investors."

The Australian dollar strengthened by 0.4% to $0.68355, reflecting a rise of over 3% in just under two weeks.

The index measuring the greenback against six major currencies stood at 100.75, remaining above the one-year low it reached last week. The euro remained stable at $1.1165.

Goldman Sachs reported that the Fed’s rate cut seems to have alleviated market concerns regarding a potential U.S. recession. Their G10 FX team anticipates a mild recovery for the U.S. dollar in the next three months, followed by a decline later on.

Fed futures traders are expecting 75 bps in rate cuts by the end of the year, with almost 200 bps anticipated by December 2025, which would bring the Fed’s policy rate to 2.75% by the end of next year, per CME FedWatch.

Following the Fed’s rate cut, the U.S. Treasury yield curve has become steeper. Investors are betting on the likelihood of another significant rate cut after Fed Governor Christopher Waller expressed concerns that inflation might soon fall significantly below the central bank’s 2% target.

In other news, most economists surveyed foreseeing two more 25 bps rate cuts during the Fed’s final two meetings of the year.

In political news, U.S. House Republicans introduced a three-month stopgap bill to prevent a government shutdown.

For the yen, an upcoming ruling party vote to select a new prime minister adds complexity to the BOJ’s upcoming tasks. A snap election is expected in late October.

Liberal Democratic Party candidates vying to replace outgoing Prime Minister Fumio Kishida have varying perspectives on monetary policy. Sanae Takaichi, who could become Japan’s first female prime minister, is a reflationist critical of the BOJ for potentially raising rates prematurely. Shigeru Ishiba views the central bank’s policies positively, while Shinjiro Koizumi, son of former Prime Minister Junichiro Koizumi, has asserted he will uphold the BOJ’s independence.

Analysts at Barclays pointed out that the upcoming leadership change presents mixed risks for the yen. They cautioned that if pro-Abenomics candidate Takaichi wins, it could hinder the BOJ’s efforts to normalize policy and generate concerns about fiscal discipline, possibly resulting in a steeper Japanese bond curve and downward pressure on the yen as investor expectations for rate increases diminish.

The Bank of England maintained its current rates on Thursday, with the governor emphasizing the need to be "cautious not to cut too quickly or too much." The pound remained stable at $1.3315, close to the highs reached after the strong retail sales data released on Friday.