Authors: Kevin Buckland and Harry Robertson
TOKYO/LONDON (Reuters) – The dollar retreated from a three-month high on Wednesday as investors awaited key economic data, while bitcoin rose to near record highs as investors increased their bets on Donald Trump winning next week’s presidential election.
Meanwhile, the euro strengthened from a three-month low as inflation and growth data emerged from the euro zone, and the pound held steady ahead of the novel Labor government’s first budget.
Mixed U.S. indicators overnight, showing a loose U.S. labor market but a confident consumer, provided little clarity on the Federal Reserve’s interest rate outlook, allowing the dollar to fall along with Treasury yields.
However, recent economic readings have shown resilience in the labor market and the economy, prompting investors to back off interest rate cuts. ADP’s private sector jobs report will be released later in the day, along with third-quarter growth data, ahead of potentially key monthly employment data on Friday.
The index, which measures the currency against six major rivals including the yen and the euro, was last down 0.1% at 104.16, after hitting a July 30 high of 104.63 on Tuesday before ending the day almost unchanged level.
It fell to 4.232% on Wednesday, after hitting its highest level since July 5 at 4.339% in the previous session.
“The latest macro news from the US has weakened the dollar’s growth,” said Francesco Pesole, currency strategist at Dutch bank ING, referring to Tuesday’s job vacancies data.
But he added: “We suspect strong economic growth could prevent the macroeconomy from turning negative for the dollar ahead of Friday’s payroll.”
A decline in Treasury yields caused the dollar to fall 0.15% against the yen to 153.15 yen. But the yen was on track for its biggest monthly decline against the dollar since 2022 as the strength of the U.S. economy and waning expectations of another Bank of Japan interest rate hike hit the currency.
Both the dollar and U.S. bond yields have also risen in recent days amid growing speculation in markets and on some betting platforms about the Nov. 5 victory of Republican presidential candidate Trump, whose tariff and immigration policies are seen as inflationary.
This helped cryptocurrencies’ bitcoin lead the rally near its all-time high in March of $73,803.25, as Trump vowed to make the United States the “crypto capital of the planet.”
The token recently changed hands at around $72,482 after reaching $73,609.88 in the previous session.
The euro was last up 0.15% at $1.0836, rising slightly after economic growth and regional inflation data in Germany came in stronger than expected, causing investors to reduce their investment in December’s interest rate cut by 50 basis points by the European Central Bank.
Separate data showed the euro zone economy grew by 0.4% in the third quarter, more than the 0.2% expected by economists.
Sterling was unchanged at $1.3002, having previously hit a nine-day high ahead of the Labor government’s first budget on Wednesday.
Finance Minister Rachel Reeves and Prime Minister Keir Starmer have reiterated the need for stringent fiscal measures to facilitate improve the UK’s public finances.
They aim to maintain investor confidence, two years after then-Prime Minister Liz Truss’s tax cut plans triggered a bond market crisis.
“It’s quite common for aspects of budget announcements to be published (earlier), but the new Labor government has taken this to a new level and the scope for shock seems more limited today than before,” said Derek Halpenny, currency strategist at lending firm MUFG .
The dollar fell to $0.6537 for the first time since Aug. 8, after data showed inflation fell to a 3-1/2-year low, and then fell 0.27% to $0.6578.
The Reserve Bank of Australia’s preferred trimmed mean inflation rate fell to 3.5% from 4.0% in the third quarter, but service sector inflation remained elevated.
