Dollar Holds Near 3-Month High as Fed Rate Cut Bets Fade; Asian Currencies Stay Flat

Asian currencies traded in a flat-to-lower range on Thursday as the U.S. dollar steadied near a three-month high, supported by strong labor data and diminishing expectations for a Federal Reserve rate cut in December. Persistent uncertainty from a prolonged U.S. government shutdown also kept traders cautious, with attention turning to private economic indicators for market direction.

The dollar index and its futures slipped about 0.1% during Asian trading hours but remained close to their recent highs. The greenback maintained strength after Federal Reserve Chair Jerome Powell signaled that a December rate cut was not guaranteed, prompting markets to reassess earlier dovish expectations. According to the CME FedWatch Tool, traders now see a 59.3% chance of a 25-basis-point rate cut in December, down from 70.3% a day earlier.

Stronger-than-expected ADP nonfarm employment data for October underscored the resilience of the U.S. labor market, while Purchasing Managers’ Index (PMI) data showed sustained business activity. With official government data releases delayed by the shutdown, traders increasingly relied on private reports for economic cues.

The Japanese yen strengthened modestly, with the USD/JPY pair falling 0.2% after September wage income data showed a 1.9% year-on-year rise, improving from 1.3% in August—the slowest pace in a year. The stronger wage growth reinforced expectations that the Bank of Japan (BOJ) could move toward a rate hike as soon as December, following hints from the central bank’s latest meeting minutes.

Elsewhere, other Asian currencies saw limited movement. The Australian dollar was steady despite robust export and trade figures, while the Chinese yuan remained flat even as the People’s Bank of China (PBOC) set a slightly stronger daily midpoint. The Singapore dollar edged up 0.1%, the Taiwan dollar slipped 0.2%, and the Indian rupee weakened slightly, holding above 88 per U.S. dollar.