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Published : 01 Dec 2025, 09:54 AM
The dollar began December on the back foot, as investors braced for a pivotal month that could bring the Federal Reserve's final rate cut of the year and the confirmation of a dovish successor to Chair Jerome Powell.
In Asia, eyes were on a speech by Bank of Japan (BOJ) Governor Kazuo Ueda for clues on whether the central bank could deliver a rate hike later this month to stem a slide in the yen.
After an hours-long outage at the world's largest exchange operator CME Group last week which upended trading across stocks, bonds, commodities and currencies, the foreign exchange market was back in full swing on Monday, though moves were largely muted as traders awaited key data releases and events scattered throughout the month.
The yen extended gains from earlier in the session on data which showed Japanese corporate spending on factories and equipment rose 2.9% in July-September versus the same period in the previous year, signalling the world's fourth-largest economy was weathering the impact of US tariffs quite well.
The Japanese currency was last 0.2% higher at 155.84 per dollar, away from its 10-month trough of 157.90 hit last month that left traders alert to the risk of a yen-buying intervention from Tokyo.
Finance Minister Satsuki Katayama said on Sunday that recent erratic swings in the foreign exchange market and rapid yen weakening are "clearly not driven by fundamentals".
"I'll definitely be closely watching his speech today, because Ueda has a great opportunity to provide a guide to financial markets over the near-term BOJ policy outlook," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
"Given recent communication by officials and the sharp weakening of the Japanese yen, Governor Ueda could well use his speech to signal a rate hike later this month. It is our base case that he will provide stronger guidance to markets about an imminent hike."
A broad pullback in the dollar over the past few sessions has given some reprieve to the yen, though the Japanese currency remains just 0.9% stronger for the year and continues to languish near milestone lows against the euro and sterling.
In other currencies, the euro EUR= rose slightly against a weaker dollar, up 0.02% to $1.1600.
Sterling was little changed at $1.3240, having clocked its best week in over three months on Friday in a sign of relief among investors after British Finance Minister Rachel Reeves revealed her long-awaited budget.
Still, the main focus for investors was on the outlook for US rates, with markets now pricing in an 87% chance the Fed will cut by 25 basis points when it meets next week, according to the CME FedWatch tool.
The sharp repricing of Fed easing expectations and a report that White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next Fed chair have dragged on the dollar, which on Friday clocked its worst week in four months.
US Treasury Secretary Scott Bessent said there was a good chance President Donald Trump would announce his pick before Christmas.
The greenback was struggling to recoup losses against a basket of currencies on Monday and eased slightly to 99.42.
The Australian dollar eased 0.08% to $0.6543, while the New Zealand dollar was down 0.09% to $0.5733.
"With December FOMC now closer to fully pricing a 25bp cut, we think the market will increasingly focus on the pricing of subsequent meetings," said economists at Goldman Sachs in a note.
"Division on the committee is restraining more dovish pricing, but with a large amount of labor market data due before the January meeting we think too little is priced in Q1."
November's US employment report will be released on Dec 16, after the Fed's policy meeting this month, and will include October nonfarm payrolls.
There will be no unemployment rate for October as the longest shutdown in history prevented the collection of the household survey data.
Elsewhere, bitcoin was down 3.6% to $87,881.82, while ether fell 5% to $2,871.59.
