Dollar hits one-month high against yen as Fed seen taking time on rate cuts Reuters

By Kevin Buckland

TOKYO (Reuters) – The dollar climbed to a one-month high against the yen on Thursday as a solid U.S. labor market supported the idea that the Federal Reserve need not rush to cut interest rates.

The yen came under strong selling pressure on Wednesday after Japan’s new prime minister said the country was not ready for further rate hikes following a meeting with the central bank governor.

The euro eased not far from a three-week low hit in the previous session after Isabel Schnabel, normally in charge of European Central Bank policy, took a dovish tone on inflation, cementing bets for a rate cut in this month.

The U.S. haven currency saw further demand on Wednesday after Iran fired a salvo of about 180 ballistic missiles into Israel, spurring a vow of revenge and raising fears of all-out war.

which measures the currency against the euro, yen and four other top rivals, ticked up to 101.70 at 0023 GMT, a three-week high, extending a 0.45 percent gain from the previous session.

U.S. private payrolls grew by a more-than-expected 143,000 jobs last month, the ADP National Employment Report showed on Wednesday, raising expectations for a strong reading for the potentially crucial monthly payrolls numbers non-agricultural Friday.

Traders currently have a 34.6% odds on another 50 basis point US interest rate cut on November 7, after the Fed kicked off its easing cycle with a very large cut last month. That’s down from 36.8 percent a day earlier and 57.4 percent a week ago, according to CME Group’s (NASDAQ: ) FedWatch tool, but still looks too high, according to Ray Attrill, chief FX strategy at National Australia Bank ( OTC: ).

Although the ADP report is often a poor predictor of nonfarm payrolls, Wednesday’s data “reduces the chances of a big payroll loss,” Attrill said.

“I think if the overall wage report isn’t too bad tomorrow night, then we’ll see the price (for a 50 basis point cut) come in pretty significantly.”

The dollar added 0.09 percent to 146.575 yen, after previously hitting 146.885 for the first time since Sept. 3.

Dovish Bank of Japan policymaker Asahi Noguchi, who opposed a rate hike in July, will give a speech later in the day.

The euro was little changed at $1.10455, not far from Wednesday’s low of $1.10325, a level last seen on September 12.

Sterling was flat at $1.3261.

The Australian dollar was flat at $0.6884.

Risk-sensitive currencies sold off on Wednesday in the initial sharp reaction to Iran’s offensive, but there were still few signs of retaliation from Israel, allowing traders to regain their balance.

“Markets are inherently bad at trying to price risk,” National Australia Bank’s Attrill said.

“These events are things that markets deal with as they happen,” he said. “Markets are aware of that, but I think they’re sticking to their knits, which are focused on economic fundamentals.”