The dollar experienced a decline on Wednesday following private-sector U.S. jobs data that raised concerns regarding the labor market’s stability. Investors are also preparing for an upcoming U.S. government reopening, which is anticipated to release a backlog of economic data. Recently, payroll processor ADP reported that U.S. companies are eliminating over 11,000 jobs weekly as of late October. This highlights the shifting dynamics of hiring trends on a weekly basis and indicates a potential further decline in a labor market that Federal Reserve policymakers are closely observing.

The dollar declined following the data release and faced challenges in regaining its losses during early Asia trade on Wednesday, as traders increased their expectations for a Fed cut in December. The euro maintained its position at $1.1586, while sterling moved away from a seven-month low, trading at $1.3149. The dollar remained subdued against a basket of currencies, hovering close to its lowest level in over a week, last recorded at 99.46. “The alternative data suggests a softer labour market picture overall… however, whether we are witnessing a worsening deterioration in the U.S. labour market remains an open question,” stated Sim Moh Siong.

“The comprehensive data indicates that the labour market is experiencing a gradual cooling trend. We anticipate confirmation of this observation from the forthcoming official data, expected to be released next week alongside the reopening of the U.S. government.” Market participants are currently estimating a nearly 68% probability that the Federal Reserve will lower rates by 25 basis points in the upcoming month, an increase from approximately 62% just one day prior, as per indications. The benchmark 10-year U.S. Treasury yield decreased by 3 basis points to 4.0791% early in Asia, following the closure of trading in the U.S. on Tuesday due to the Veterans Day holiday. The two-year yield decreased by approximately 3 basis points to 3.5596%. “We maintain our perspective that the balance of risks concerning the labour market, inflation, and consumption supports a 25-bp rate cut next month,” stated Brian Martin. Recently, Fed policymakers have adopted a more cautious stance regarding additional easing, pointing to the lack of critical economic data resulting from the U.S. government shutdown as a factor for their prudence. However, a reopening appears to be on the horizon, as House of Representatives members returned to Washington on Tuesday for a vote that may potentially end the longest shutdown in history.

The House, under Republican control, is scheduled to vote on a compromise this Wednesday afternoon aimed at reinstating funding for government agencies and concluding the shutdown that began on October 1. The breakthrough has also elevated risk currencies such as the Australian and New Zealand dollars, which were last recorded at an increase of 0.02% each, standing at $0.6529 and $0.5656, respectively. The safe-haven yen has experienced pressure due to the prevailing risk-on market sentiment, currently positioned at 154.08 per dollar after declining to a nine-month low of 154.495 in the prior session. The decline stands at approximately 0.5% for the week to date. The yen encountered additional challenges due to expectations of increased fiscal spending in Japan, following Prime Minister Sanae Takaichi’s announcement of efforts to establish a new fiscal target spanning multiple years to enable more flexible expenditure, effectively diminishing the nation’s dedication to fiscal consolidation. She reiterated her stance for the Bank of Japan to adopt a cautious approach regarding interest rate increases, highlighting a significant divergence from the aggressive posture of Fed policymakers.