The yen remained close to a 10-month low on Friday, yet received some support as Japanese officials intensified their verbal interventions to curb the currency’s drop, while the dollar was poised for its strongest week in over a month. The yen experienced a brief uptick in early Asian trading following comments from Japanese Finance Minister Satsuki Katayama, who indicated that intervention could be considered to address excessively volatile and speculative movements. This has left traders vigilant for any indications of yen purchasing activity from Tokyo. The currency exhibited a modest increase, standing at 157.41 per dollar, yet it continued to hover close to Thursday’s 10-month low of 157.90. The projection indicates a potential decline of 1.8% for the week.

This week, the currency markets have concentrated significantly on the yen, which has reached new lows as concerns about the country’s deteriorating fiscal situation, driven by Prime Minister Sanae Takaichi’s extravagant spending policies, have intensified among investors. Takaichi’s cabinet has given the green light to a substantial economic stimulus package amounting to 21.3 trillion yen ($135.40 billion) on Friday, marking her inaugural significant policy initiative. “The elephant in the room now is mounting intervention risks,” stated Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho. “Interventions are likely to be opportunistic and short-lived.” Essentially, speed bumps, not barricades. In July 2024, Tokyo allocated 5.53 trillion yen, approximately $37 billion, to intervene in the foreign exchange market, aiming to strengthen the yen from its 38-year lows. The yen remained close to a record low against the euro, last recorded at 181.56. Sterling increased by 0.07% to 205.94 yen, remaining close to a 16-month peak.

In the broader market, the dollar appeared poised for a weekly gain as investors anticipated that the U.S. Federal Reserve is unlikely to cut rates next month. The delayed U.S. nonfarm payrolls report released on Thursday presented a mixed overview of the labor market. It indicated that employment growth accelerated in September; however, the unemployment rate increased to 4.4%, marking its highest level in four years. This solidified the perspective that the Fed is expected to hold off on rate cuts during its December meeting, as decision-makers navigate the economic uncertainty created by the U.S. government shutdown. The euro remained close to a two-week low against the dollar, last trading at $1.1537, indicating a potential weekly decline of 0.7%. Sterling increased by 0.14% to $1.3087; however, it is projected to decline by 0.8% for the week. Investors are closely monitoring Britain’s forthcoming budget, which poses a significant challenge for the country’s currency and bond markets. The dollar index, which assesses the greenback against a range of competitors, approached a 5-1/2-month high and was last recorded at 100.13. The asset was positioned to achieve a weekly increase exceeding 0.8%, marking its strongest performance in more than a month.

“The shutdown-delayed September jobs report did not provide clarity on what the FOMC will do at its much-debated December meeting,” economists stated in a note. “We maintain our perspective that the appropriate action for the Fed is to reduce the federal funds rate by 25 bps … That being noted, the actions of the Fed constitute a distinct discussion altogether. Their commentary indicated that the decision to lower rates in December was a “close” call, and they noted that a hold “would not surprise us at this point.” The current market sentiment reflects a mere 27% probability of the Federal Reserve implementing a rate cut in the upcoming month. In other developments, the Australian dollar experienced a rise of 0.09%, reaching $0.6446, following a decline of 0.6% overnight amid a widespread risk-off sentiment in the markets. The New Zealand dollar appreciated by 0.11% to $0.5588, following a decline of 0.4% on Thursday. In the realm of cryptocurrencies, bitcoin has declined to a seven-month low of $85,387.82, whereas ether has experienced a drop of over 2%, reaching a four-month low of $2,777.39.