(Reuters) – The dollar began the last quarter of the year in the ascendant on Monday due to prospects of U.S. interest rates staying higher for longer, and the yen’s slide to a near one-year low put traders on watch for intervention by Japanese authorities.
Currency moves were subdued in early Asia trade with parts of Australia out for a holiday and China away for its Golden Week, though analysts said a narrowly-averted U.S. government shutdown could bring some relief to markets.
The yen eased to 149.83 per dollar, its weakest in over 11 months, moving ever close to the 150 mark that some traders believe could trigger intervention by Japanese authorities, similar to their action last year, to support the currency.
“Intervention risks could limit, if not partially reverse yen losses; especially as dollar/yen dangerously flirting with 150 prompts push-back from Tokyo,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
“But the intent of the (Ministry of Finance) is not a clear line in the sand. Nor is the Bank of Japan (BOJ) likely to buckle under yen pressures to concede a hawkish overhaul at pain of far more lasting economic damage.”
A summary of opinions at the BOJ’s September meeting out on Monday showed policymakers discussed various factors that must be taken into account when exiting ultra-loose policy.
“They’re wary of tightening too early and squashing… a rise in inflation and growth,” said Jarrod Kerr, chief economist at Kiwibank. “They deserve to be cautious, though.”
In the broader currency market, the euro lost 0.06% to $1.05665, after ending the previous quarter with a 3% fall, its worst performance in a year.
Sterling was last 0.14% lower at $1.21875, having similarly slid nearly 4% against the dollar in the third quarter.
The U.S. dollar index, however, stood not too far from its recent 10-month high and was last at 106.27, after clocking its best quarterly performance in a year last month thanks to persistently hawkish Federal Reserve rhetoric.
“I’d rather be in dollars at the moment than euros or pounds or others,” said Kiwibank’s Kerr. “I think the dollar will find a bit more support.”
The U.S. Congress late on Saturday passed a stopgap funding bill with overwhelming Democratic support in a bid to avoid the federal government’s fourth partial shutdown in a decade, a move which Pepperstone’s head of research Chris Weston said “should be welcomed by risky assets”.
“We also now have a firm understanding that the U.S. Labor Department will release nonfarm payrolls data this Friday, as well as the U.S. CPI report on 12 October, which may have not been the case had the (government) shut down,” he said.
“This puts the 1 November FOMC meeting back on the table as a potential venue for a further 25-basis-point rate hike.”
Elsewhere, the Australian dollar slid 0.47% to $0.64045, while the New Zealand dollar edged 0.19% lower to $0.5987, as traders looked ahead to rate decisions from their respective central banks this week.
