Yen Strengthens as Policy Uncertainty and Data Delays Lift Safe-Haven Demand

Key Moments

Safe-Haven Currencies Supported in Volatile Trade

The yen climbed in Asian trading on Tuesday, while the dollar rebounded from a two-month low, as renewed market swings pushed investors toward safe-haven currencies before key U.S. economic releases and a packed central bank calendar.

The Japanese currency gained 0.3% to 154.735 per dollar, with traders focusing on the Bank of Japan’s policy decision on Friday, where market participants broadly anticipate a 25-basis-point rate increase to 0.75%.

“Market optimism over a Bank of Japan hike this Friday remains intact,” said Christopher Wong, currency strategist at OCBC in Singapore. “While the U.S. tech and Asian equity sell-off did weigh on sentiment, it was not affecting the currencies too broadly.”

Dollar Index Edges Higher Ahead of Delayed U.S. Jobs Data

The dollar index, which tracks the U.S. currency against six major peers, traded at 98.256, nudging higher after coming close to its lowest level since October 17 earlier in the session.

Attention turned to the Bureau of Labor Statistics, which was set to publish long-delayed combined employment reports for October and November later on Tuesday. The releases had been pushed back due to data collection disruptions during what was described as the longest U.S. government shutdown in history. A series of preliminary manufacturing indicators was also scheduled.

The jobs figures “will help give closure on how U.S. employment conditions were panning out during the federal government shutdown,” Paul Mackel, global head of FX research at HSBC, wrote in a research report. “The Fed’s messaging last week gave us reassurance that the broad USD is not out of the woods yet.”

Fed funds futures implied a 75.6% probability that the U.S. Federal Reserve would leave interest rates unchanged at its next meeting on January 28, the same as a day earlier, according to the CME Group’s FedWatch tool.

Uncertainty Around Labor Data Quality

Some analysts questioned how much clarity the delayed jobs data would ultimately provide.

“October could include all the DOGE job cuts that have been delayed and not accounted for,” said Rodrigo Catril, currency strategist at National Australia Bank in Sydney, referring to mass layoffs by Elon Musk’s so-called Department of Government Efficiency earlier this year.

“I’m not sure if we’re going to get a sense of what happening in October, but we should and need to know what happened then to get a sense of the path of job creation in the U.S.,” he said on a podcast.

Yuan Strengthens as Authorities Seen Guiding Gradual Gains

The offshore Chinese yuan firmed 0.1% to 7.0381 per dollar, its strongest level since October 3, 2024.

“We view this as a deliberate move to steer the RMB on a gradual appreciation path while maintaining market order,” said OCBC’s Wong. He added that he was watching whether policymakers might try to moderate the pace of gains through their daily fixing mechanism.

Central Bank Decisions in Focus

Investors also faced a busy week of central bank meetings across major economies. The Bank of England was widely expected to lower its benchmark rate by 25 basis points to 3.75%.

The European Central Bank was anticipated to keep rates unchanged, alongside Sweden’s Riksbank and Norway’s Norges Bank.

Major Currency Moves

The euro traded steadily at $1.1751 as progress in peace talks aimed at ending the war in Ukraine continued, with the United States reportedly offering NATO-style security guarantees for Kyiv. The British pound slipped 0.1% to $1.3368.

The Australian dollar weakened 0.1% to $0.6635, showing little reaction after a private survey indicated that consumer sentiment declined in December. The New Zealand dollar eased 0.1% to $0.5778 as markets reduced expectations for rate hikes next year and the government’s mid-year budget showed a modest reduction in bond issuance.

Crypto Prices Slip After Prior Pullback

Digital asset markets swung between gains and losses following a decline on Monday. Bitcoin fell 0.7% to $85,620.38, while ether traded 1.1% lower at $2,912.30.