Dollar's High Ride: Currency Markets Brace for Big Shifts

The dollar reached a three-month high against the yen due to political shifts in Japan, while the pound gained ahead of Britain's budget. China's currency dipped amid news of large-scale fiscal plans. Upcoming U.S. economic data may influence Federal Reserve policy, affecting global currency markets.

The dollar surged to a three-month high against the yen on Tuesday following Japan's elections, which left the country's political future uncertain. As a result, Japan's monetary picture remains unclear, while the pound strengthened ahead of Britain's forthcoming budget announcement.

The dollar is on track for its biggest monthly gain against major currencies in over two years, bolstered by a resilient U.S. economy and anticipation of rising Treasury yields. Upcoming U.S. employment and inflation data may further impact the Federal Reserve's policy decisions, influencing global currency markets.

Meanwhile, the Chinese yuan weakened to its lowest since mid-August amid reports Beijing may launch a significant fiscal package. This uncertainty, combined with looming economic data, makes the currency market turbulent as players adjust their strategies accordingly.

(With inputs from agencies.)