The dollar remained below a 10-month high against the yen as the quarter came to a close, causing some relief regarding intervention concerns. The euro held steady after rebounding, but remained close to its January low, which, if broken, would be the lowest since December. The dollar index, which tracks the currency against six other major currencies, was mostly flat, on track for its 11th consecutive week of gains. Speculation that the US economy would fare better than other economies in the face of higher interest rates boosted the dollar. However, a potential partial US government shutdown and uncertainty surrounding the release of economic data could impact the Federal Reserve’s decision-making process on further rate increases.
There is focus on the yen as it approaches the 150 level, which may trigger intervention from Japanese authorities. Recent data showed that core inflation in Japan’s capital slowed for the third consecutive month due to falling fuel costs, suggesting that cost pressures may be peaking. Additionally, factory output remained flat in August, indicating the impact of weak global demand and China’s struggling economy on Japanese companies. Although intervention in the currency market may not have a significant impact, the Japanese government may choose to demonstrate its efforts in tackling the surge in import prices caused by a weaker yen.
Meanwhile, the euro slightly weakened against the dollar but rebounded from this week’s multi-month low. Investors are eagerly awaiting the release of Friday’s CPI data from the eurozone, which could provide insights into the bloc’s economic condition. Overall, there remains uncertainty as central banks rely on timely data to determine their monetary policy decisions, and any delays or lack of visibility in economic data may prompt investors to remain cautious.