(Reuters) – The dollar hit three-month highs against the yen on Tuesday, but was little changed on the day against most majors as traders bided their time ahead of next week’s U.S. election and a slew of incoming economic data.
The loss of a parliamentary majority for Japan’s ruling coalition in weekend elections muddied the political and monetary picture, and has been weighing on the yen.
The dollar was last up 0.1% on the day at 153.365 yen . The BOJ announces its monetary policy decision on Thursday, and is widely expected to leave rates unchanged.
Still, the dollar is heading for its largest monthly rise against a basket of major currencies in 2-1/2 years, and holding near three-month highs ahead of data that could determine the path for Federal Reserve policy.
U.S. job openings fell to a more than 3-1/2 years low in September and data for the prior month was revised down, sign of a continually cooling labour market.
Meanwhile, U.S. consumer confidence increased to a nine-month high in October as perceptions of the labour market improved.
“We’re still seeing the same pattern of a slowdown in jobs that has been the overall theme for the last few months, even if September’s (nonfarm payroll) number was well above expectations,” said Helen Given, associate director of trading at Monex USA, Washington.
She said, however, she thought any downside for the dollar remained limited, given the inherent risk of the election and Fed meetings the week after next.
Recent data have highlighted the resilience of the U.S. economy, which, together with mounting market bets of a win by Republican candidate Donald Trump over his Democratic rival Kamala Harris in the Nov. 5 U.S. presidential election, have underpinned the dollar and pushed up Treasury yields.
The dollar index has risen 3.6% so far in October, marking its best monthly performance since April 2022. It is up this year against every major currency except the pound.
This week’s data slate includes the September U.S. core personal consumption expenditures price index – the Fed’s preferred measure of inflation – on Thursday, as well as a flurry of jobs reports.
“Even though we have a lot of data this week, I’m not sure that we’re going to get any information that allows us to then 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. “So, there’s a risk that it’s just going to be choppy until next week, and we’re all basically waiting for the (election) results.”
COUNTDOWN TO BUDGET
Sterling edged up 0.2% to 1.2997 ahead of the Labour government’s first budget.
Finance minister Rachel Reeves, along with Prime Minister Keir Starmer, has reiterated the need for tough fiscal measures to help close a hole in British public finances, all while seeking to retain the confidence of investors, two years after then-Prime Minister Liz Truss’ tax-cutting plans sparked a crisis in the bond market.
Key for sterling will be estimates from the British Office for Budget Responsibility, which makes the forecasts that underpin the government’s spending and tax plans.
The euro dipped 0.13% to $1.0797 against the dollar and was down 0.3% against sterling at 83.08 pence.
Meanwhile, the Chinese yuan, which touched its weakest level against the dollar since mid-August, showed little reaction to the possibility Beijing may issue over $1.4 trillion in new debt as part of a series of measures to shore up the economy.
The yuan was flat at 7.151 in the offshore market, while onshore it was last seen at 7.1340 per dollar.
Two sources with knowledge of the matter told Reuters China’s top legislative body, the Standing Committee of the National People’s Congress, is looking to approve a new fiscal package, including 6 trillion yuan which would partly be raised via special sovereign bonds, on the last day of a meeting to be held from Nov. 4-8.
