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BOJ eyes rate hike as soon as next month, sources say
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Investors welcome UK budget
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Traders anticipate December Fed cut, eye new Fed chair
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New Zealand dollar surges on hawkish RBNZ tilt
(Adds comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Nov 26 (Reuters) -
The yen weakened against the dollar on Wednesday, after an
initial boost from speculation about a possible Bank of Japan
rate hike next month faded, while sterling advanced on a UK
budget that offered a larger-than-expected fiscal buffer.
The dollar fell as investors maintained expectations that the
Federal Reserve will cut interest rates at its December meeting,
as a mixed set of economic indicators did little to alter that
outlook.
The yen has been on the market's radar for some time, as
investors remain alert for the possibility of Japanese
intervention to boost the weakening currency.
The BOJ is preparing markets for a possible interest rate hike
as soon as next month, sources told Reuters, reviving previous
hawkish language as worries about sharp yen declines return and
political pressure to keep rates low fades.
The yen initially rose against the dollar after the Reuters
report of a possible rate hike, before reversing course. It was
last down 0.2% at 156.44 per dollar, having earlier hit an
intraday high of 155.66.
"It's going to be hard to significantly change the
trajectory of the yen with just one hike unless the BOJ delivers
a hawkish hike and commits to raising rates consistently through
2026 to bring inflation under control," said Vassili
Serebriakov, FX strategist at UBS in New York.
"Unless that happens, I don't think the yen is going to
benefit significantly because the rate differentials between the
U.S. and Japan are still quite wide and volatility is still
low."
The yen has been under pressure from worries about Japan's
worsening fiscal position.
"There is a possibility of intervention over Thanksgiving, but
if the market's fear of intervention is sufficient to stop
dollar/yen from rising, it sort of reduces the possibility,"
said Jane Foley, head of FX strategy at Rabobank London.
The pound was also in focus with Britain's budget
announcement.
British finance minister Rachel Reeves delivered a budget that
will give her more room for meeting her borrowing targets, which
calmed investor nerves.
In a figure closely watched by investors assessing Britain's
borrowing risks, the Office for Budget Responsibility said the
government will now have more than double its previous buffer
for meeting its fiscal targets even as it raises spending on
welfare.
Sterling was last up 0.5% on the dollar at $1.3228 and was also
higher versus the euro, which slipped 0.3% to 87.64 pence.
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DOVISH FED IN 2026?
In the United States, Karl Schamotta, chief market
strategist at Corpay in Toronto, said the focus is on the
"growing likelihood of a more aggressive easing campaign from
the Fed."
Data showed that initial claims for state unemployment
benefits dropped 6,000 to a seasonally adjusted 216,000 for the
week ended November 22, the lowest since April. Economists
polled by Reuters had forecast 225,000 claims for the latest
week.
A separate report showed non-defense capital goods orders
excluding aircraft, a closely tracked proxy for business
spending, jumped 0.9% in September after an upwardly revised
0.9% increase in August.
The data, however, failed to bolster the dollar.
Investors are also betting that the reported leading
candidate to be the next Fed chair may pursue a more dovish
policy, adding to the U.S. currency's weak outlook.
Bloomberg News reported that White House economic adviser Kevin
Hassett has emerged as the front-runner to be the new chair.
Hassett, like President Donald Trump, has said interest rates
should be lower than they are under current Fed Chair Jerome
Powell. U.S. Treasury Secretary Scott Bessent said on Tuesday
there is a good chance Trump would announce his pick before
Christmas.
"We have had three months without economic data from the
U.S. and we're going to get a lot. ... Markets will be much more
driven by actual fundamental data rather than an appointment for
the Fed chair," said Ales Koutny, head of international rates at
Vanguard in London.
U.S. rate futures have now priced in an 85% chance of a 25
basis-point move next month, according to the CME FedWatch tool.
Elsewhere, the euro last changed hands at $1.1590, up
0.2%.
The New Zealand dollar jumped after the country's central
bank cut its interest rate to 2.25% as expected, but signaled an
end to the easing cycle as the economy showed early signs of
recovery.
The kiwi rose 1.3% to US$0.5695, after earlier hitting a
three-week high, as traders reduced expectations for further
rate cuts.
The Australian dollar rose 0.7% to US$0.6517 after
Australian inflation accelerated for a fourth straight month in
October, closing the door to further policy easing.
Currency
bid
prices
at 26
November
? 07:24
p.m. GMT
Descript RIC Last U.S. Pct YTD High Low
ion Close Chang Pct Bid Bid
Previous e
Session
Dollar % 552
Euro/Dol 7
Dollar/Y .75
Euro/Yen Dollar/S Sterling 8 312
5?
Dollar/C % 036
Aussie/D 1 646
8
Euro/Swi Euro/Ste NZ 7 619
ollar
Dollar/N % % 1 192
6
Euro/Nor 9
Dollar/S % % 899
Euro/Swe
Print
