The Australian dollar rose on Monday while the Japanese yen weakened, as growing optimism that the US government could soon reopen reduced demand for the yen as a safe haven and supported growth-linked currencies, while European currencies remained broadly stable.
The US dollar gained 0.5% against the yen to 154.22, nearing a nine-month high reached earlier this month.
The Australian dollar climbed 0.55% against the US dollar to 0.6532 and advanced more than 1% against the yen. The AUD/JPY pair is often seen as a barometer of global risk appetite and growth prospects, typically moving in tandem with equity markets, which were also higher on Monday.
Kit Juckes, chief FX strategist at Société Générale, said, “The textbook trade right now in a ‘risk-on’ environment is long the Australian dollar versus the Japanese yen.”
The US Senate took a step late Sunday toward advancing legislation to reopen the federal government and end the longest shutdown in the country’s history. While the vote was procedural, several Democratic lawmakers reached a deal with Republicans, and President Donald Trump said things looked “very close to ending the shutdown.”
On prediction markets such as Polymarket, the implied probability of the shutdown ending before November 15 jumped to 92%.
If the shutdown is lifted, attention will shift back to US economic data, particularly the nonfarm payrolls report, which has not been released in over a month due to the government closure.
Markets currently price in roughly a 60% chance that the Federal Reserve will cut interest rates in December, though those expectations could shift sharply once new data are published.
“I fear that, at least initially, when we finally get the data, the numbers may disappoint for the US economy,” Juckes said.
Uncertainty kept the dollar steady against European currencies, with the euro at 1.1558, the pound at 1.3163, and the Swiss franc at 0.8062 — little changed on the day.
Local factors also influenced the yen and Australian dollar.
Japanese Prime Minister Sanae Takaichi said Monday she would set a new multi-year fiscal target allowing for more flexible spending, marking a step away from Japan’s long-standing fiscal discipline.
Separately, the Bank of Japan’s Summary of Opinions released Monday noted that “the fog surrounding Japan’s economic outlook has started to lift compared with July,” potentially paving the way for a rate hike in December that could support the yen.
Salman Ahmed, head of global macro and strategic asset allocation, said, “There’s too much optimism about whether this policy will be a full continuation of Abenomics, but we do expect another rate increase from the BOJ.”
Meanwhile, Reserve Bank of Australia Deputy Governor Andrew Hauser said in a speech that financial conditions in Australia are now near the neutral rate — the level that neither stimulates nor restrains the economy.
“The speech, which carried a relatively hawkish tone, helped lift the Australian dollar,” analysts at Westpac wrote in a note.
In Europe, the only notable mover was the Norwegian krone, which strengthened after data showed core inflation rose unexpectedly in October, reducing the likelihood of further rate cuts by the central bank.
The US dollar fell 0.44% against the krone to 10.11, while the euro declined by a similar margin to 11.7.
