Dollar at 3-month high as traders pare near-term rate cut wagers

Economic Overview - The Federal Reserve cut rates last week, but Chair Jerome Powell indicated it might be the last cut of the year, with traders now pricing in a 65% chance of a rate cut in December, down from 94% a week earlier [1][11] - The dollar index rose 0.1% to 99.99, reaching a three-month high, as the shift in near-term expectations boosted the dollar [2][4][11] U.S. Economic Data - Due to the ongoing U.S. government shutdown, investors are relying on non-government sources for economic data, such as ADP employment data, to assess the U.S. economy's health [5][11] - The Institute for Supply Management survey indicated that U.S. manufacturing contracted for the eighth consecutive month in October, with new orders remaining subdued [5][11] Japanese Yen and Bank of Japan - The yen weakened to 154.38 per U.S. dollar, nearing levels where Japanese authorities previously intervened to support the currency [1][7][11] - The Bank of Japan maintained steady rates, with Governor Kazuo Ueda signaling a potential rate hike in December, but market reactions have been underwhelming [6][11] - Analysts suggest that unless the Bank of Japan tightens policy before year-end, the yen is likely to weaken further [7][11] Australian Economic Outlook - The Reserve Bank of Australia is expected to hold rates steady following a strong third-quarter inflation reading, which has diminished expectations for near-term rate cuts [8][11] - Markets have adjusted their expectations, now pricing in only one rate cut by mid-2026, as stronger inflation data suggests a more hawkish stance from the RBA [8][9][11]