Dollar edges lower against yen as central bank moves, data loom

REUTERS/JASON LEE/FILE PHOTO/FILE PHOTO/FILE PHOTO

Euro, Hong Kong dollar, U.S. dollar, yen, pound and 100-yuan banknotes are seen in this picture illustration, in Beijing, China, in January 2016. The U.S. dollar edged lower against rivals, including the yen and Swiss franc today in a week packed with central bank decisions and U.S. data that could shed light on the Federal Reserve’s near-term policy outlook.

NEW YORK/LONDON >> The U.S. dollar edged lower against rivals, including the yen and Swiss franc today in a week packed with central bank decisions and U.S. data that could shed light on the Federal Reserve’s near-term policy outlook.

The dollar was last down 0.31% against the yen, trading at 155.345 to the dollar.

The Bank of Japan is widely expected to raise interest rates on Friday, giving the yen an advantage over a dollar that could lose support if expected U.S. rate cuts emerge early next year.

“Our economists shifted to expecting a December hike from the BoJ in their base case,” Goldman Sachs analysts led by Alexandra Kanter wrote in an investor note.

“The guidance will be key for near-term direction, and a recent report suggests that there may be less emphasis placed on the bank’s estimate of the neutral rate.” The BoJ is likely to maintain a pledge to keep raising interest rates but emphasise that the pace of increases will depend on how the economy reacts to each increase, sources told Reuters.

The Bank of England and European Central Bank are among the central banks making monetary policy decisions this week. Markets have almost fully priced in a Bank of England cut as inflation finally shows signs of easing, while the ECB is expected to leave rates unchanged. Traders have begun speculating that a rate increase could be on the cards for the ECB in 2026.

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Sterling was down 0.12% at $1.33645, erasing earlier gains, while the euro edged higher by 0.06% at $1.174775 in choppy trading, on track for a fourth straight session of gains.

“In terms of the BoE, I think it’s going to be very interesting. I think it’s going to be a finely balanced decision to cut,” said Joseph Capurso, currency strategist at Commonwealth Bank of Australia.

“The risk is that the inflation data that comes out this week may take out some of the pricing for follow-up rate cuts.”

U.K. wage growth data is due on Tuesday and consumer inflation on Wednesday.

A catalogue of U.S. data delayed by the government shutdown is set to be released, giving investors a long-awaited view of the world’s largest economy. The November jobs report is due on Tuesday and inflation figures on Thursday. A divided Fed cut rates last week, but Chair Jerome Powell signalled that borrowing costs were unlikely to drop further in the near term. Current above-target inflation does not reflect underlying supply and demand dynamics that are generating price increases much closer to the central bank’s 2% target, Federal Reserve Governor Stephen Miran said today, asserting that “prices are now once again stable.”

“The question really is, is the prevailing theme going to be shifted dramatically from the delayed data we get this week,” said Eugene Epstein, head of trading & structured products for Moneycorp Americas.

“At the moment, the U.S. and the bulk of its G10 peers are like two ships in the night with respect to 2026 central bank rate policy. In the U.S., it’s a story of how long the central bank is going to wait until another cut while almost everywhere else in developed markets, it’s a story of how is the central going to wait until they start hiking,” Epstein said.

The dollar rose 0.16% to 0.79725 against the Swiss franc. The dollar index, which measures the U.S. currency against a basket of rivals including the yen and the euro, was a shade lower by 0.09% at 98.318.

Sweden’s Riksbank and Norway’s Norges Bank are expected to leave interest rates unchanged after their policy meetings this week.

The Swedish crown strengthened by 0.48% to 9.3009 to the dollar. Against the Norwegian crown, the dollar was up 0.34% at 10.1582.

In cryptocurrencies, bitcoin continued its losing streak and was on track for a fourth straight session of losses. It was last down 2.56% to $86,205.11. Ether declined 4.72% to $2,936.89.

Additional reporting by Rae Wee Editing by Susan Fenton, Chizu Nomiyama, David Goodman and Nick Zieminski.

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