Dollar mixed as US government looks to reopen, yen at nine-month low

By Karen Brettell

NEW YORK (Reuters) -The U.S. dollar dipped against the euro on Wednesday as traders evaluated what a flood of economic releases will mean for Federal Reserve interest rate policy once the government reopens.

The Japanese yen, meanwhile, reached a nine-month low against the greenback on concerns that the new Japanese government will seek to influence the country's central bank into delaying rate increases.

The U.S. House of Representatives will try to end the longest government shutdown in U.S. history on Wednesday, with a vote on a stopgap funding package to restart disrupted food assistance, pay hundreds of thousands of federal workers and revive a hobbled air-traffic control system.

The reopening will lead to an avalanche of economic data releases that were delayed due to the shutdown, including the closely watched monthly jobs report.

“We're going to be getting a fresh round of data dumped on us after a quiet period, so I think there's a lot of potential for movement,” said Eric Theoret, FX strategist at Scotiabank in Toronto.

The White House said on Wednesday that October jobs and inflation data reports might never be released as a consequence of the government shutdown.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,  rose 0.05% to 99.50, with the euro up 0.04% at $1.1585.

Fed Chair Jerome Powell said last month that a cut at the U.S. central bank’s December meeting is not certain, and Fed policymakers are divided on whether to continue easing policy as inflation remains relatively elevated.

Fed funds futures traders are pricing in 64% odds of a December rate reduction.

Atlanta Federal Reserve President Raphael Bostic said on Wednesday he will retire at the end of his current term on February 28, 2026. He also said that he favors leaving interest rates where they are until there is "clear evidence" that inflation is moving back to the U.S. central bank's 2% target.

U.S. Treasury Secretary Scott Bessent said Americans would see "substantial announcements" in coming days aimed at lowering the prices of products like coffee, bananas and other items not grown in the United States.

The U.S. Supreme Court also announced on Wednesday that it will hear arguments on January 21 in President Donald Trump's attempt to remove Fed Governor Lisa Cook. 

The yen dropped after Japanese Prime Minister Sanae Takaichi expressed her administration's preference for interest rates to stay low and asked for close coordination with the Bank of Japan.

She also has asked BOJ Governor Kazuo Ueda to report regularly to the government’s Council on Economic and Fiscal Policy. 

“Markets are taking that as maybe some kind of soft influence,” said Theoret. “We're still expecting a hike from the BOJ at the December meeting, but there's been some increased concerns that maybe we could see it get pushed out to the next meeting in January.”

Japanese Finance Minister Satsuki Katayama gave a new verbal warning on yen weakness, noting “one-sided and rapid movements in the foreign exchange market."

"The effect of verbal intervention is not as significant as it once was," said Mohamad Al-Saraf, FX strategist at Danske Bank. "For Japanese authorities to really strengthen the yen, they need to do real intervention, which could be a possibility over the next couple of months."

Against the Japanese yen, the dollar strengthened 0.33% to 154.66. and earlier reached 155.04, the highest since February 4.

"Market talk indicated the 155 area as a possible 'line in the sand' for USD-JPY at present and this might push investors to test whether it is effectively so," Roberto Mialich, global FX strategist at UniCredit said in a report. "The weaker yen also raises pressure on the BOJ to resume tightening ahead of the next 19 December meeting."

Sterling weakened 0.15% to $1.313. The Aussie strengthened 0.25% to $0.6541.

A top Australian central banker said on Wednesday that there was increasing debate about whether the current cash rate of 3.6% is restrictive enough to keep inflation in check, adding that the question is critical for the policy outlook.

In cryptocurrencies, bitcoin fell 1.23% to $101,389. 

(Reporting by Karen Brettell; Additional reporting by Samuel Indyk and Rae Wee; editing by Toby Chopra, Mark Heinrich and Diane Craft)