FOREX-Dollar steadies against yen, falls vs euro as focus turns to US data

By Stefano Rebaudo

Nov 11 (Reuters) - The U.S. dollar edged up versus the safe-haven yen and dropped against the euro on Tuesday as investors were uncertain about the U.S. economic outlook while awaiting a strong run of data once the U.S. government shutdown ends.

Markets are providing mixed signals about risk appetite, with Wall Street futures falling on concerns over elevated technology valuations, but European shares .STOXX rising to a two-week high

Growth-sensitive currencies such as the Australian dollar and British pound have strengthened recently, while safe-havens like the yen have weakened amid optimism that the U.S. government shutdown will end quickly, averting significant economic damage.

In early Asian trade, the yen touched its weakest level since February, while the Australian dollar held firm against the greenback.

Market participants expect the U.S. closure to end in the next few days after the Senate on Monday approved a compromise that would restore funding for federal agencies and would stall President Donald Trump's campaign to downsize the federal workforce.

FACTORING IN AN END TO THE SHUTDOWN

Upcoming economic indicators will help clarify the outlook for the U.S. economy and Federal Reserve policy.

“Our expectation is that the economy is holding up nicely, and inflation is passing through in a quite moderate way,” said Isabelle Mateos y Lago, group chief economist at BNP Paribas, adding that this should allow the Fed to cut rates by 25 basis points in December and then be more cautious going into 2026.

“Our reading of the economy is we're still in this low-hire, low-fire mode, with no great signs of stress. But let's see what the data says,” she added.

The deal to end the shutdown now heads to the House, where Speaker Mike Johnson has said he would like to pass it as soon as Wednesday and send it on to Trump to sign into law.

"There will be little sense of direction in the coming days: reopening prospects allow markets to price out the negative growth impact, but a resumption of data releases in the U.S. does carry non-negligible downside risks to the dollar," said Francesco Pesole, forex strategist at ING.

"We think markets are underestimating the downside risks for the labour market, U.S. front-end rates and, by extension, the dollar into year-end," he added.

The euro EUR=EBS was up 0.15% at $1.1572.

The single currency is supported by a firmly-anchored outlook for European Central Bank policy, with its key rate expected to stay unchanged through 2027, while the Fed is seen easing policy.

Risks to euro zone inflation are balanced and growth is stronger than once expected, two ECB policymakers said on Tuesday.

"Public spending in support of European Union defence and infrastructure in Germany should become more effective as of early 2026 and turn into a dominant, and firmly positive, economic force in Europe in 2026/27, with Germany benefiting most," said Reinhard Cluse, chief European economist at UBS, after lifting euro zone GDP forecasts.

STERLING DIPS, YEN UNDER PRESSURE

Sterling fell 0.25% to $1.3148 GBP=D3 after data showed Britain's labour market cooled noticeably in the third quarter.

The dollar steadied at 154.18 yen JPY=EBS, after hitting 154.495, the highest since February.

The yen was under pressure after Japan's new Prime Minister Sanae Takaichi called for policymakers to go slow on rate hikes at the same time as U.S. policymakers have turned cautious on further cuts.

The Swiss franc was on track for its fourth straight daily rise after Trump said the U.S. was working with Switzerland on a deal to lower the 39% tariff rate. Switzerland could agree a deal with the U.S. this week, a Swiss source told Reuters.

The Swiss currency CHF=EBS was up 0.35% to 0.8020 per dollar.

The greenback dropped 0.15% to 0.6528 against the Australian dollar AUD=D3, snapping a two-day rising streak.