Dollar Weakens Pre-Payrolls as Fed Rate-Cut Outlook Intensifies

The U.S. dollar fell against major peers as traders priced in a higher likelihood of Federal Reserve rate cuts following weaker-than-expected economic data. Asian buyers drove the AUD up and the JPY higher, while the yen strengthened for a third consecutive day amid divergence in rate policies and a well-behaved 10-year government bond curve post-January Lower House elections. Retail sales in December slowed more than forecast, signaling reduced consumer support for the economy as the year ended. The nonfarm payroll change is expected to rise 65,000 in January, the largest gain in four months, according to a Bloomberg survey of economists. Hedge funds are buying dollar-yen options and purchasing the Australian dollar in spot markets, capitalizing on the broader sell-off in the greenback.