Bitcoin Jumps While Japan Holiday Dulls Most Currencies

Bitcoin price was the notable mover as it reached for one-month highs on Monday, sustaining its rally after the Federal Reserve's super-sized rate cut last week, while the yen and most other major currencies stagnated with Japanese markets on holiday.

The dollar strengthened against the yen last week after policy meetings in both the United States and Japan, hitting its highest level in two weeks at 144.50 yen. It was around 144.08 early on Monday.

Bitcoin was up 0.8% above $63,200

Bitcoin rose 0.8%, trading above $63,200 and nearing its highest level in a month. Meanwhile, the Australian dollar held steady around $0.68 after gaining more than 3% in under two weeks.

The U.S. dollar index, which tracks the greenback against a basket of major currencies, edged up to 100.8, maintaining its position above the one-year low it touched last week.

Goldman Sachs noted that the Fed's recent rate cut "seems to have alleviated concerns about a U.S. recession." Their G10 FX team expects a modest recovery for the U.S. dollar over the next three months, followed by a decline in the 6- to 12-month range.

Fed futures traders have priced in 75 basis points of rate cuts by year-end, with nearly 200 basis points anticipated by December 2025, bringing the Fed's policy rate down to 2.75%, according to CME FedWatch.

The U.S. Treasury yield curve has steepened following the Fed's rate cut, as investors increase bets on another significant reduction. This sentiment was reinforced after Fed Governor Christopher Waller expressed concerns on Friday that inflation could soon fall well below the central bank's 2% target.

The Bank of Japan (BOJ) left interest rates unchanged

The Bank of Japan (BOJ) kept interest rates steady last week and signaled no urgency to raise them again. This move, following the Federal Reserve's 50 basis point rate cut just days earlier, temporarily halted the yen's significant appreciation this month. The yen has risen 1.4% in September.

With Japan's markets closed for Autumnal Equinox Day, trading was largely influenced by expectations of additional Fed rate cuts, which have boosted equities, commodity currencies, and other risk-sensitive assets.

"The majority of market players had expected the next rate hike to take place in December," said Tomoichiro Kubota, senior market analyst at Matsui Securities Co. "But Mr. Ueda's remarks today prompted some of them to think that maybe it will be delayed until early next year."

The BOJ held steady after raising the overnight call rate target to around 0.25% in July, up from the previous range of 0% to 0.1%. This move aimed to unwind its decade-long unconventional monetary easing as signs of economic recovery emerged.

BOJ Governor Kazuo Ueda, speaking after a two-day policy meeting, stated that economic indicators have aligned with the bank's expectations so far. He emphasized that the BOJ would consider further interest rate hikes if the economy and inflation continue to progress as anticipated.

The BOJ's shift toward a less accommodative policy stands in contrast to other major central banks, which have begun loosening monetary conditions to stimulate economic growth. On Wednesday, the U.S. Federal Reserve lowered its key interest rate for the first time in more than four years, aligning with the European Central Bank and the Bank of England, both of which have also adopted monetary easing measures.

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