In early trading on Wednesday, the yen showed signs of recovery while the U.S. dollar maintained stability against most major currencies. This shift followed a global selloff in stocks that prompted investors to flock to safe-haven assets. The yen appreciated by 0.1% after reaching a nine-month low against the dollar the previous day, with the exchange rate standing at 155.49 yen to the dollar.
The dollar index, which gauges the greenback’s strength relative to a basket of six other currencies, remained flat at 99.594, hovering close to a one-week high. The resilience of U.S. Treasury bonds contributed to this steadiness, attracting bids amidst the current market climate.
Global equity markets faced significant decline this week, with the S&P 500 experiencing a four-day losing streak fueled by concerns over inflated valuations of artificial intelligence stocks. As U.S. equity futures continued to decline during Asian trading on Wednesday, market sentiment remained bleak.
Adding to the market anxiety, the U.S. Department of Labor released initial jobless claims data on Tuesday, revealing a considerable increase in the number of Americans filing for jobless benefits between mid-September and mid-October. Market analyst Tony Sycamore of IG in Sydney remarked that this was the first data release since the U.S. government shut down its federal operations at the beginning of October. He noted that the data was not encouraging, calling the forthcoming delayed release of September’s non-farm payrolls data on Thursday a “more important test.”
Speculation around monetary easing by the Federal Reserve is growing, with traders increasing their bets ahead of the central bank’s next meeting. The Fed funds futures market is currently pricing in a 46.6% probability of a 25-basis-point rate cut at the meeting scheduled for December 10, up from 42.4% the day prior. There remains uncertainty within the Fed itself, with members split on whether to lower rates to safeguard the job market or maintain them to combat inflation.
In a related development, Richmond Federal Reserve President Thomas Barkin expressed hopes that upcoming data and community interviews would provide clearer insights into the economic landscape. His colleagues appear divided on the central bank’s next moves, grappling with the best approach to balance employment and inflation concerns.
Former U.S. President Donald Trump intensified his criticisms of Federal Reserve Chair Jerome Powell on Tuesday, expressing his desire to replace Powell but noting that he is being obstructed from doing so. Powell’s term is set to expire in May, and Trump is expected to finalize his shortlist for potential Fed chair candidates after Thanksgiving.
Meanwhile, data from the Treasury Department indicated that Japan’s holdings of U.S. Treasuries increased for the ninth consecutive month in September, cementing Japan’s status as the largest non-U.S. holder of these securities with $1.189 trillion—its highest level since August 2022.
In other currency movements, the Australian dollar traded at $0.65085, showing a slight 0.1% decline following steady wage growth data for the third quarter. The New Zealand dollar fell by 0.2% to $0.5659. The euro remained largely unchanged, standing at $1.1580, just above a one-week low of $1.1572, while the British pound was stable at $1.3148.
