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NEW YORK – The dollar regained ground against the yen on Tuesday, recovering from Monday’s selloff, even as expectations for a December rate hike by the Bank of Japan lingered, while the euro edged up after data showed euro zone inflation was slightly hotter than expected.

The US currency came under pressure late in the session after US President Donald Trump said a potential Federal Reserve chair was present as he introduced White House economic adviser Kevin Hassett at a White House meeting.

Earlier in the day, Trump said he would be announcing his choice to succeed Jerome Powell as head of the Federal Reserve early next year.

Hassett would be viewed by many investors as a dovish pick to replace Powell, and as such his nomination could weigh on the dollar.

The greenback was 0.2% higher against the yen at 155.845, after hitting a two-week low on Monday, following a sale of 10-year Japanese government bonds that drew the strongest demand since September.

“We’re basically back to where we started before (Bank of Japan Governor Kazuo) Ueda’s remarks yesterday, which is maybe a bit perplexing considering that swaps still price about an 80% chance of a Dec hike,” said Michael Brown, senior research strategist at Pepperstone.

Stocks, bonds, cryptocurrencies, and the dollar all tumbled on Monday after Ueda said the Japanese central bank would consider the “pros and cons” of raising interest rates at its next policy meeting, sending Japanese two-year yields above 1% for the first time since 2008 and prompting a spillover into global bond markets.

“To me, it speaks to everything still being very much USD-driven, with the pressure on the buck seen yesterday amid increasing expectations that Hassett will get the Fed Chair gig having given way to slightly more rational conditions today, as participants refocus on what remains a solid US growth outlook, even with a 25-basis-point Fed cut next week very much on the cards,” Brown said.

“It still seems that, in the absence of an obvious narrative, the greenback goes back to being the ‘cleanest dirty shirt’ and finds some healthy demand,” he said.

Data on Monday showed weaker-than-expected manufacturing in the US, heaping pressure on the Federal Reserve to cut interest rates this month.

Fed funds futures are pricing an 87% probability of a 25-basis-point cut at the Fed’s next meeting on December 10, compared with a 63% chance a month ago, according to the CME Group’s FedWatch tool.

INFLATION WATCH

The euro was 0.1% higher at USD 1.1624 after data showed inflation in the 20 nations sharing the euro accelerated to 2.2% last month from 2.1% in October, a small rise that is unlikely to be too concerning for the European Central Bank.

Inflation in the euro zone is practically at the ECB’s 2% target, ECB policymaker Joachim Nagel said in an interview published on Tuesday.

“This (inflation data) comes at a time where some had claimed we could yet see another cut from the ECB, although the likelihood is that their easing cycle is over,” said Joshua Mahony, chief market analyst at Scope Markets.

Sterling was about flat on the day at USD 1.3211, having touched its highest level in a month on Monday.

The Bank of England cut the amount of capital it estimates lenders need to hold, in a bid to boost lending and stimulate the economy. It was the first reduction to bank capital requirements since the financial crisis.

Leading cryptocurrency Bitcoin rose 7% to USD 92,321, pulling away from the 10-day low touched in the previous session.

(Reporting by Saqib Iqbal Ahmed in New York and Joice Alves in London; Additional reporting by Gregor Stuart Hunter in Singapore; Editing by Andrea Ricci, Nick Zieminski, and Edmund Klamann)

SINGAPORE – The US dollar remained under pressure on Tuesday as weaker-than-expected manufacturing activity data from the world’s biggest economy heaped pressure on the Federal Reserve to cut interest rates at its policy meeting later this month.

The US dollar index, which measures the greenback’s strength against a basket of six major peers, edged lower to 99.408 at the start of the Asian trading session after falling for a seventh consecutive session to hit a two-week low during US trading hours on Monday as stocks and bonds pulled back.

Data released on Monday showed US manufacturing contracted for the ninth straight month in November, as the Institute for Supply Management’s manufacturing PMI dropped to 48.2 in November from 48.7 a month earlier.

Gauges of new orders and employment also deteriorated, while input prices rose as the drag from import tariffs persisted.

“It all suggests to me that demand in the economy has decelerated,” said Brian Martin, head of G3 economics at ANZ in London.

“I really do think the Fed needs to cut interest rates, and not just cut rates in December, but follow through with further cuts next year,” he said on a podcast, adding he forecasts an additional 50 basis points of cuts in 2026.

Fed funds futures are pricing in an implied 88% probability of a 25-basis-point cut at the US central bank’s next meeting on December 10, compared to a 63% chance a month ago, according to the CME Group’s FedWatch tool.

The yield on the US 10-year Treasury bond was last up at 4.086% after a selloff in global bond markets on Monday.

Against the yen, the dollar traded at 155.51 yen, unchanged from late US levels, after Bank of Japan Governor Kazuo Ueda said on Monday that the central bank would consider the “pros and cons” of raising interest rates at its next policy meeting, sending Japanese two-year yields above 1% for the first time since 2008.

The euro stood at USD 1.1610, holding steady so far in Asia, as talks to end the war in Ukraine continued, with European leaders rallying around Ukrainian President Volodymyr Zelenskiy after an earlier US-backed peace proposal that favored Russia, while the US special envoy headed to Moscow for more talks with the Kremlin.

Sterling traded at USD 1.3216, near its highest levels in a month but little changed so far on the day. The head of Britain’s fiscal watchdog resigned on Monday after the agency inadvertently released key details of the government’s annual tax and spending budget last week before finance minister Rachel Reeves announced them in parliament.

The Australian dollar fetched USD 0.6544, while the kiwi dollar traded at USD 0.5727 3, both little changed at the start of the Asian trading session.

(Reporting by Gregor Stuart Hunter; Editing by Muralikumar Anantharaman)

SINGAPORE – The yen rose on Monday, helped by comments from Bank of Japan Governor Kazuo Ueda, who left the door open to a near-term rate hike, while the dollar began the month on the back foot as investors ramped up bets of a US rate cut this month.

Ueda on Monday gave a more upbeat outlook of Japan’s economy and said the central bank will consider the “pros and cons” of raising interest rates at its next policy meeting in December, in what market participants considered a hawkish tone by the governor.

That helped the Japanese currency extend gains, climbing 0.4% to a session high of 155.49 per dollar.

“It seems to be game-prep ahead of a potential rate hike, making a hike at the December or January meeting highly plausible,” said OCBC currency strategist Christopher Wong.

“But the question is if this is one hike and another long wait. A yen recovery would likely need the BOJ to follow through with stronger guidance.”

Traders have been pricing in a greater chance of a BOJ rate hike this month, with the yen’s recent slide – it fell 1.4% in November – adding to the case for raising rates.

Finance Minister Satsuki Katayama said on Sunday that recent erratic swings in the foreign exchange market and rapid yen weakening are “clearly not driven by fundamentals”.

In the broader market, the dollar eased as investors braced for a pivotal month that could bring the Fed’s final rate cut of the year and the confirmation of a dovish successor to Chair Jerome Powell.

The euro was up 0.04% at USD 1.1605, while sterling last bought USD 1.3239, after having clocked its best week in over three months on Friday in a relief rally following British Finance Minister Rachel Reeves’ budget reveal.

Against a basket of currencies, the greenback was down 0.05% to 99.39, having lost 0.7% last week.

Traders are now pricing in an 87% chance the Fed will cut by 25 basis points when it meets next week, according to the CME FedWatch tool.

The sharp repricing of Fed easing expectations and a report that White House economic adviser Kevin Hassett has emerged as the frontrunner to be the next Fed chair have dragged on the dollar, which on Friday clocked its worst week in four months.

US Treasury Secretary Scott Bessent said there was a good chance President Donald Trump would announce his pick before Christmas.

“With December FOMC now closer to fully pricing a 25bp cut, we think the market will increasingly focus on the pricing of subsequent meetings,” economists at Goldman Sachs said in a note.

“Division on the committee is restraining more dovish pricing, but with a large amount of labor market data due before the January meeting we think too little is priced in Q1.”

November’s US employment report will be released on December 16, after the Fed’s policy meeting this month, and will include October nonfarm payrolls.

There will be no unemployment rate for October as the longest shutdown in history prevented the collection of the household survey data.

The foreign exchange market was back in full swing on Monday, having recovered from an hours-long outage at the world’s largest exchange operator CME Group last week which upended trading across stocks, bonds, commodities and currencies.

The Australian dollar rose 0.08% to USD 0.6553, while the New Zealand dollar was little changed at USD 0.5738.

Bitcoin slid 4% to USD 87,543.06, while ether fell 5.5% to USD 2,855.93.

(Reporting by Rae Wee; Editing by Muralikumar Anantharaman and Edwina Gibbs)