Dollar Reaches One-Month High Against Yen as Fed Expected to Delay Rate Cuts, Reports Reuters

By Kevin Buckland

TOKYO (Reuters) – The dollar reached a one-month high against the yen on Thursday, buoyed by strong data from the U.S. jobs market which suggested that the Federal Reserve may not need to hasten interest rate cuts.

The yen faced significant selling pressure after Japan’s new prime minister indicated that the country is not prepared for additional rate hikes following a discussion with the central bank governor.

Meanwhile, the euro remained close to a three-week low from the previous session, as European Central Bank policymaker Isabel Schnabel expressed a dovish perspective on inflation, reinforcing speculation about a rate cut this month.

In the context of rising geopolitical tensions, particularly after Iran launched approximately 180 ballistic missiles into Israel, the safe-haven U.S. dollar garnered additional demand. This incident has raised concerns about potential wider conflict in the region.

The dollar index, which measures the currency against the euro, yen, and several other major rivals, climbed to 101.70, marking a three-week high and an increase of 0.45% from the previous session.

The latest ADP National Employment Report revealed that U.S. private payrolls increased by a greater-than-expected 143,000 jobs last month. This has heightened expectations for a positive reading in the upcoming non-farm payrolls figures scheduled for release on Friday.

Currently, traders assign a 34.6% probability to another 50 basis-point rate cut by the Fed on November 7, down from 36.8% the previous day and 57.4% a week ago. According to Ray Attrill, head of FX strategy at National Australia Bank, these odds still appear overly high.

Despite its historical unreliability as a predictor for non-farm payrolls, Wednesday’s ADP report "reduces the odds of an outsized downside miss on payrolls," Attrill observed.

He added, "If tomorrow’s payrolls report comes in reasonably well, we could see significant adjustments in those pricing projections for a 50 basis-point cut."

The dollar rose 0.09% to 146.575 yen after previously hitting 146.885, its highest point since September 3.

Asahi Noguchi, a dovish Bank of Japan policymaker who opposed the rate hike in July, is set to deliver a speech later today.

The euro was relatively stable at $1.10455, not far from Wednesday’s low of $1.10325, a level last reached on September 12. The British pound held steady at $1.3261, and the Australian dollar remained flat at $0.6884.

While risk-sensitive currencies faced selling pressure in response to Iran’s actions, there has been little indication of Israeli retaliation, allowing traders to regain composure.

"Markets often struggle to accurately price in tail risk," Attrill remarked. "Such events are addressed as they arise, and while traders are aware of them, they tend to focus on the underlying economic fundamentals."