Dollar recovers from Yen’s pressure

The US dollar staged a modest recovery on Tuesday after facing pressure from the Japanese yen in the previous session. The greenback drew support from recent developments, including hawkish comments from Federal Reserve officials and improved economic data.

St. Louis Federal Reserve President, Matthew Mosallam, stated that “the cost of premature easing is much greater than the cost of delayed easing,” a sentiment that markets interpreted as a call for a more gradual pace of interest rate cuts.

Similarly, Federal Reserve Governor Adriana Kugler emphasized the need for the central bank to remain focused on bringing inflation back to its 2% target while adopting a “balanced approach” that avoids an “undesirable” slowdown in job growth and economic expansion.

Market expectations for a 50-basis-point rate cut at the next Federal Open Market Committee meeting have dwindled to nearly zero, compared with an 88.00% probability previously. This shift followed the release of strong US jobs data on Friday, which bolstered the narrative of a “soft landing” and suggested that the Fed is nearing its goal of taming inflation without tipping the economy into recession.

Furthermore, the US budget deficit narrowed to a five-month low of $70.4 billion in August, compared with $78.9 billion in the previous month, undershooting market expectations of a decline to $70.5 billion.

The US dollar had come under pressure on [date] after the Japanese yen received a boost from comments made by Japan’s finance minister.