Authors: Laura Matthews and Amanda Cooper
NEW YORK/LONDON (Reuters) – The dollar hit three-month highs against the yen on Tuesday, but was little changed on the day against most major markets as investors bided their time ahead of next week’s U.S. elections and a slew of incoming economic data.
The loss of the parliamentary majority by the ruling coalition in Japan in the weekend elections disturbed the political and monetary picture and affected the yen.
The dollar was last up 0.1% on the day, trading at 153.365 yen. The BOJ announces its monetary policy decision on Thursday and is widely expected to leave interest rates unchanged.
Still, the dollar is headed for its biggest monthly gain against a basket of major currencies in 2.5 years and is holding near three-month highs ahead of data that could chart the Federal Reserve’s policy path.
The number of U.S. job openings fell to its lowest level in more than 3.5 years in September, and data for the previous month was revised down, a sign of a continuing cooling of the labor market.
Meanwhile, U.S. consumer confidence rose to its highest level in nine months in October as perceptions of the labor market improved.
“We continue to see the same pattern of slowdown in the labor market that has been a major theme over the last few months, even though September’s (nonfarm payrolls) numbers were well above expectations,” said Helen Give, deputy chief trading officer at Monex United States, Washington.
But she said she thought any negative impact on the dollar would be constrained given the inherent risks of the election and Fed meetings next week.
The latest data highlighted the resilience of the U.S. economy, which, along with rising market expectations for Republican Party candidate Donald Trump’s victory over Democratic rival Kamala Harris in the November 5 U.S. presidential election, strengthened the dollar and pushed up Treasury yields.
It is up 3.6% so far in October, the best monthly performance since April 2022. It is up against all major currencies this year except the pound.
This week’s data set includes the September core U.S. personal spending price index – the Fed’s preferred measure of inflation – from Thursday, as well as a number of labor market reports.
“Even though we have a lot of data this week, I’m not sure we’re going to get any information that would allow us to expect another big move in the dollar, one way or the other,” said Dan Tobon, head of G10 FX strategy at Citi in New York. “There is therefore a risk that the situation will be uncertain until next week and basically we are all waiting for the (election) results.”
COUNTDOWN TO YOUR BUDGET
Sterling rose 0.2% to 1.2997 ahead of the Labor government’s first budget.
Finance Minister Rachel Reeves and Prime Minister Keir Starmer reiterated the need for tough fiscal measures to assist plug the hole in Britain’s public finances, all while trying to maintain investor confidence, two years after then Prime Minister Liz Truss’ tax cut plans sparked crisis on the bond market.
The key for the pound will be estimates from the UK Office for Budget Responsibility, which prepares forecasts that form the basis of the government’s spending and tax plans.
The euro fell 0.13% to $1.0797 against the dollar and fell 0.3% against sterling to 83.08 pence.
Meanwhile, the currency, which hit its weakest level against the dollar since mid-August, showed little reaction to the possibility of Beijing issuing more than $1.4 trillion in fresh debt as part of a series of measures aimed at strengthening the economy.
On the offshore market, the yuan exchange rate remained at 7.151, while the market last traded at 7.1340 per dollar.
Two sources with knowledge of the matter told Reuters. China’s highest legislative body, the Standing Committee of the National People’s Congress, intends on the last day to approve a fresh fiscal package of 6 trillion yuan, which would be partly raised from special treasury bonds. meeting, which will take place on November 4-8.
