Continued dollar weakness, expectations of BOJ interest rate hikes, and uncertainty in Fed policy are the main variables.

Source: BlockMedia Original Title: [Forex] Dollar Weakens against Yen… BOJ Signals Rate Hike, Uncertainty Burden from Fed Officials Original Link: https://www.blockmedia.co.kr/archives/1013603 The dollar closed weakly in the foreign exchange market on the first trading day of December. According to TradingView, at 7 AM on the 2nd, ( Korean time ), the dollar index ( DXY ), which indicates the value of the dollar against the six major currencies, recorded a decrease of 0.07% from the previous day, standing at 99.407. Weak manufacturing indicators in the U.S. and the possibility of a rate cut by the Federal Reserve ( Fed ), along with hawkish signals from the Bank of Japan ( BOJ ), have put downward pressure on the dollar.

The key variable in the foreign exchange market on this day was the expectation of interest rate hikes from Japan. BOJ Governor Kazuo Ueda hinted that interest rate increases could be discussed at the December monetary policy meeting, stating, “If the rate is raised to 0.75%, I will clarify the future path more clearly.” As a result, the yen showed strength against major currencies, and the dollar/yen exchange rate fell nearly 1% at one point before slightly narrowing the decline, finishing trading at the 155.09 yen level.

Jayati Baradwaj, head of foreign exchange strategy at TD Securities, stated, “The BOJ is showing confidence in raising interest rates,” and analyzed that “the possibility of a December hike has already been significantly priced into the market, which supports the strength of the yen.”

Along with this, the Federal Reserve's outlook for a rate cut in December has strengthened, contributing to the dollar's weakness. According to the CME FedWatch, the market is reflecting an over 88% probability of a 25bp cut this month, and some investors are considering the so-called 'hawkish cut' scenario.

Policy uncertainty has also emerged as a burden factor. With news related to the selection of the next Federal Reserve chair being reported, the recent performance of the dollar has recorded its worst weekly performance in four months against a basket of major currencies.

In terms of economic indicators, the U.S. manufacturing sector continued to struggle in November. The ISM Manufacturing PMI showed a contraction for the ninth consecutive month, with a simultaneous decline in new orders and an increase in input costs, limiting the factors for a stronger dollar. This week, key figures such as the September Personal Consumption Expenditures ( PCE ) price index and the ISM Services PMI are scheduled, which are expected to influence the direction of the market.

Meanwhile, the foreign exchange market has normalized following last week's trading suspension, and trading volume has shown signs of gradual recovery. Bitcoin fell nearly 6% during the day amid risk aversion sentiment, dropping to $85,464.