The U.S. dollar edged lower on Wednesday but stayed close to recent multi-month highs, supported by safe-haven demand and waning expectations for additional near-term Federal Reserve rate cuts.
At 04:25 ET (09:25 GMT), the Dollar Index — which measures the greenback against six major peers — slipped 0.1% to 100.002 after reaching its strongest level since April 1 during Tuesday’s session.
Markets Eye ADP Payrolls Data
The dollar gained ground earlier in the week as investors sought safety amid a technology-led sell-off on Wall Street, driven by mounting concerns over stretched equity valuations. The greenback had already been trending higher after the Fed’s latest rate cut, which Chair Jerome Powell indicated could be the last for this year.
“A more defensive mood has gripped global markets and FX this week,” analysts at ING wrote in a note. “FX markets are reflecting this nervousness, with high beta currencies under pressure and the dollar generally bid.”
Investor uncertainty has been compounded by the ongoing U.S. government shutdown, which has severely disrupted the release of official macroeconomic data. As a result, attention is firmly on the private ADP employment report due later today.
“An on-consensus reading today probably keeps the dollar supported, given that it would maintain doubts about whether the Fed cuts again in December,” ING added.
Euro Edges Higher on Strong German Data
The euro ticked higher, with EUR/USD up 0.1% to 1.1488, after hitting a three-month low on Tuesday.
Germany’s industrial orders climbed 1.1% in September — surpassing forecasts — while the country’s services sector recorded its fastest expansion in over two years. The final HCOB Germany services PMI rose to 54.6 in October from 51.5 in September, remaining well within growth territory.
“EUR/USD has some support at 1.1450 and let’s see what the ADP data has to offer today,” said ING.
The British pound also saw modest gains, with GBP/USD rising 0.2% to 1.3041. However, the pair remained near a seven-month low after UK finance minister Rachel Reeves hinted on Tuesday at broad-based tax increases in the upcoming budget.
Yen Strengthens After BoJ Minutes Signal Possible Rate Hike
In Asia, the Japanese yen edged higher, with USD/JPY down 0.1% to 153.54, following the release of minutes from the Bank of Japan’s September meeting. The minutes revealed that policymakers had discussed the possibility of raising interest rates in the coming months.
Several officials noted that conditions were “falling into place” for a potential rate increase, while two members voted for an immediate hike — the same stance they took in October. Although the BOJ left rates unchanged in both its September and October meetings, the central bank reaffirmed that it expects to tighten policy as inflation and growth continue to strengthen.
Elsewhere, USD/CNY dipped 0.1% to 7.1254 after data from a private survey showed China’s services sector expanded slightly faster than expected in October. The Australian dollar traded flat, with AUD/USD steady at 0.6492 despite softer-than-forecast PMI figures for the month.
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