The U.S. dollar softened on Tuesday, pressured by dovish commentary from a Federal Reserve official as traders looked ahead to a series of economic releases that could shape expectations for the Fed’s final policy decision of the year.
At 04:15 ET (09:15 GMT), the Dollar Index — which measures the greenback against six major peers — dipped 0.1% to 99.410, giving back some of Monday’s gains after a brief pause in its recent decline.
Greenback Eases Following Waller’s Remarks
The dollar pulled back after Federal Reserve Governor Christopher Waller warned of growing risks in the U.S. labor market and reiterated his support for another 25-basis-point rate cut at the December 9–10 meeting.
“Four to six weeks ago, we were still in this kind of no-hire, no-fire mode,” Waller said during an appearance at the Society of Professional Economists in London. He added that when speaking with business leaders, “they’re starting to talk about layoffs. They’re starting to plan for them.”
He continued: “It could be AI-related. It could be a lot of other things … It’s not just going to be ’no hire, no fire.’ At some point this is going to start happening.”
Still, Waller’s call for further easing stands in contrast to other Fed officials who have urged caution, leaving markets uncertain about how the committee will ultimately vote.
The reopening of the federal government means a full wave of economic indicators will be released this week, including Thursday’s closely watched September nonfarm payrolls report.
Analysts at ING wrote that “our base case remains that risks are tilted to the downside for the dollar once the U.S. data cycle kicks in, and we expect a December Fed cut to become the market’s base case again.”
Traders now assign roughly a 40% chance of a quarter-point cut in December, down from around 60% just a week earlier.
ING Sees More Upside Potential for the Euro
The euro ticked slightly higher, with EUR/USD edging up to 1.1593 after breaking a three-session slide.
According to ING, “in our view, upside risks for EUR/USD persist.” The bank noted the pair has been undervalued relative to its short-term fair value but has struggled to remain more than 1% below fair value since French political risks eased.
ING added: “Our year-end target remains 1.180. While the path higher may not resemble the one-way bullish traffic seen earlier this year, positive December seasonality could help smooth the move.”
Sterling dipped modestly, with GBP/USD down 0.1% at 1.3152 as markets awaited Finance Minister Rachel Reeves’s upcoming budget. Reeves is expected to seek tens of billions of pounds in additional revenue to stay aligned with fiscal goals ahead of the Nov. 26 announcement.
Yen Edges Up as Japanese Bond Yields Climb
USD/JPY slipped 0.2% to 154.96, with the yen firming after touching its weakest levels in nearly nine months earlier in the session.
Japanese government bond yields continued their sharp ascent, with 20-year yields hitting multi-decade highs.
Investors remain wary that new spending initiatives under Prime Minister Sanae Takaichi could further strain Japan’s already substantial debt burden. Reports suggest the administration may unveil its first economic package as early as this week. According to Reuters, Goushi Kataoka — a private-sector member of a key advisory panel — said Japan requires about $149 billion in stimulus to support growth.
Elsewhere in Asia, USD/CNY rose 0.1% to 7.1117, while AUD/USD was little changed at 0.6493.