The Japanese yen weakened to a nine-month low on Tuesday as optimism over a potential end to the U.S. government shutdown fueled risk appetite and boosted risk-sensitive currencies.
The U.S. Senate approved a deal to restore federal funding, lifting investor confidence. The bill is expected to pass the House of Representatives by Wednesday before being signed into law by President Donald Trump.
The Australian dollar climbed as much as 0.7% to $0.6536, while the euro held steady at $1.1555 and the British pound rose to $1.3165.
“The moves in FX are consistent with risk sentiment — the Aussie is benefiting, while safe-haven currencies like the yen are weakening,” said Moh Siong Sim, strategist at Singapore’s Bank.
Japan’s Prime Minister Sanae Sanoe called for a cautious approach to rate hikes, contrasting with the Federal Reserve’s measured stance on further rate cuts, adding pressure on the yen. Analysts noted that long yen positions are being unwound as rate expectations diverge between the U.S. and Japan.
Elsewhere, the New Zealand dollar slipped 0.2% to $0.5635, hovering near a seven-month low after data showed subdued inflation expectations ahead of a possible rate cut. The kiwi also hit a 12-year low against the Australian dollar, underscoring growing divergence among regional currencies.