Dollar Rallies as December Fed Rate Cut Expectations Fade

Core Insights - The dollar index rose by +0.65%, reaching a 2-week high, driven by the cancellation of the October employment report and hawkish FOMC meeting minutes [1][4] - The yen weakened significantly, hitting a 9.75-month low, due to concerns over increased Japanese government debt from a proposed stimulus package [2][7] - The US trade deficit narrowed more than expected, further supporting the dollar [2][3] Dollar Performance - The dollar's strength was bolstered by the cancellation of key employment data, reducing the likelihood of a Fed rate cut [1] - The hawkish tone of the FOMC minutes indicated that many officials prefer to keep interest rates steady for the remainder of the year [4] Yen and Japanese Economic Concerns - The yen's decline was exacerbated by dovish comments from a BOJ advisor, suggesting no interest rate hikes before March [7] - A supplementary budget of approximately 20 trillion yen ($129 billion) is anticipated to stimulate domestic demand, raising concerns about Japan's debt burden [7] Trade Deficit Impact - The US trade deficit shrank to -$59.6 billion in August from -$78.2 billion in July, which was narrower than the expected -$60.4 billion [3]