The US dollar rose against its major counterparts, the yen, sterling and the euro, on Tuesday, after Federal Reserve Chairman Jerome Powell rejected bets on further massive cuts in US interest rates.
The yen has held near its midpoint against the dollar over the past month, after a volatile couple of days, as traders assessed Japan's new hawkish Prime Minister Shigeru Ishiba and his government, Reuters reported.
The yen fell to 144.09 yen per dollar in early trading.
The Federal Reserve chairman took a more hawkish tone in a speech at a conference in Tennessee, saying the U.S. central bank is likely to stick to a quarter-point rate cut in the future.
Jerome Powell indicated on Monday that the US central bank is likely to stick to quarter-point cuts going forward after new data boosted confidence in economic growth and consumer spending.
This is not a committee that feels it is in a hurry to cut interest rates quickly, Powell said.
That left traders pricing in a 38% chance of a 50 basis point rate cut next month, up from 53% on Friday. Traders now expect 70 basis points of easing over the year.
The changing expectations of a rate cut boosted the dollar, with the greenback index rising to 100.82 at the start of the day. The euro was steady at $1.11355.
“The door is not closed for a 50 basis point rate cut, because if economic data is weak such a cut is warranted,” said Matt Simpson, chief market analyst at City Index. “But Powell clearly believes markets are overly excited about the upcoming cuts.”
The Federal Reserve began its easing cycle with a larger-than-expected cut of about half a percentage point in the middle of last month.
Powell's speech came ahead of a busy week of U.S. data, including the Institute for Supply Management's manufacturing index later Tuesday and a non-manufacturing report on Thursday, followed by potentially crucial monthly jobs numbers on Friday.
Minutes of the Bank of Japan's September policy meeting showed on Tuesday that policymakers discussed the need for caution on raising interest rates in the near term, with little impact on the market.
European Central Bank President Christine Lagarde told parliament that recent developments reinforce our confidence that inflation will return to the target level in due course, and this should be reflected in the policy decision on October 17.
The Australian dollar rose 0.09 percent to $0.69185, heading towards a 1-1/2-year high of $0.6943 hit on Monday after Australian retail sales rebounded more than expected in August.
