The yen languished near an 8-1/2-month low, pressured by wide interest rate differentials between the US and Japan.
Trading was thinned in Asia on Monday due to a holiday in Japan, leaving currencies mostly rangebound, though most were pinned near recent lows against a strong dollar.
The euro fell to a three-month trough and last traded at US$1.1536. Sterling fell 0.19% to US$1.3145 ahead of the Bank of England’s policy decision this week, where the central bank is expected to stand pat on rates.
The pound was also weighed down by mounting political pressures surrounding British finance minister Rachel Reeves, and with investors concerned about what her November budget might mean for businesses, households and overall economic activity.
While the ongoing US government shutdown is expected to delay the release of the nonfarm payrolls report on Friday, investors will have their eyes on other news, including ADP employment data and ISM PMIs this week for a pulse check on the economy.
“The lack of information is playing to sort of that calmness in markets,” said Rodrigo Catril, senior FX strategist at National Australia Bank. “And for now, I suppose what could break that while the shutdown is still ongoing, (is) a big downward surprise or even upward surprise in terms of surveys or private data releases.”
“But otherwise, at the moment, even those private data releases are not screaming or telling us that the Fed should be moving in a hurry.”
Last week, the Fed lowered rates by 25 basis points as expected but Chair Jerome Powell signalled that may be the central bank’s last reduction for the year, citing the risk of making additional moves without a more robust picture of the economy.
A number of Fed bank presidents on Friday also aired their discomfort with the decision to ease policy.
Traders have since pared back expectations for a cut in December and are now pricing in a roughly 68% chance of a move.
Against a basket of currencies, the dollar steadied at 99.73, near its strongest level since August.
Elsewhere, the yen eased 0.1% to 154.10 per dollar as it struggled to make headway against its peers.
The Japanese currency was similarly pinned near a record low against the euro and was last at 177.86.
Even though Bank of Japan Governor Kazuo Ueda last week sent the strongest signal yet that a rate hike was possible as soon as December, markets remained underwhelmed by the central bank’s gradual approach, particularly given that the Fed has turned more hawkish.
That has piled pressure on the yen, prompting jawboning from Japanese authorities to stem the currency’s slide.
“If we start getting towards 155, then you would think that those comments will become a little bit louder and even the risk of some intervention will increase,” Catril said. “But if anything, it sets the stage and is yet another argument to suggest that the BOJ cannot wait much longer.”
The New Zealand dollar was not far from a 6-1/2-month low and last bought US$0.5730.
The Aussie rose 0.2% to US$0.6566, helped slightly by expectations that the Reserve Bank of Australia will keep rates on hold on Tuesday, following an uncomfortably high reading on core inflation.