U.S. Dollar Rises Against Yen

By Kevin Buckland

TOKYO (Reuters) – The U.S. dollar edged to its highest level this month against the yen on Tuesday, with traders looking ahead to a reading of U.S. inflation due the following day for further clues on the path of Federal Reserve policy.

The Australian dollar maintained its position before a central bank interest rate decision later in the day, rebounding on Monday from a four-month low.

As of 0121 GMT, the U.S. dollar rose by 0.16% to 151.45 yen, earlier hitting 151.55, the highest since Nov. 28.

Markets are anticipating a near certainty of a quarter-point Fed rate cut on Dec. 18; however, Wednesday's consumer price index could clarify the Fed's capacity for easing next year.

Recent data showed U.S. job growth surged in November, but with the unemployment rate rising to 4.2%, it indicates an easing labor market that could prompt the Fed to cut rates again this month.

Kyle Rodda, senior financial markets analyst at Capital.com, remarked that a key market theme is the "risk of persistent inflation and fewer Fed cuts next year."

Regarding Australia, while the consensus leans towards no policy change, there remains a chance for a change in guidance following last week's GDP data indicating a struggling economy.

Rodda noted that modifying the critical phrase in the policy statement may lead to an earlier anticipated first rate cut as early as February.

Currently, traders are nearly fully priced in for an April cut, while a February move is viewed as uncertain.

The Australian dollar fell 0.23% to $0.6427 after a 0.8% increase on Monday when China announced an "appropriately loose" monetary policy for next year. The currency dipped to its lowest since Aug. 5 on Friday at $0.6373.

Meanwhile, the New Zealand dollar dropped 0.33% to $0.5846 after gaining 0.57% in the previous session.

The euro decreased 0.05% to $1.0549, and sterling fell by 0.03% to $1.2748.

The U.S. dollar index, which measures the currency against the euro, sterling, yen, and three other major peers, increased by 0.06% to 106.22.

Aside from the U.S. CPI, significant events to monitor this week include the European Central Bank meeting on Thursday, where a quarter-point cut is expected, and China's Central Economic Work Conference.

The yuan remained stable at 7.2667 per dollar in offshore trading.

Additionally, the Bank of Canada and the Swiss National Bank will decide on policy on Wednesday and Thursday, respectively, with significant rate cuts anticipated from both.

Against Canada's loonie, the U.S. dollar edged up by 0.03% to C$1.4177, close to its strongest level since April 2020. The U.S. currency was little changed at 0.87905 Swiss franc.