Aussie gains, yen weakens as end to US shutdown looks possible

By Gregor Stuart Hunter and Alun John SINGAPORE/LONDON (Reuters) -Hopes that the U.S. government could soon reopen weighed on the safe-haven Japanese yen and boosted the growth-exposed Australian dollar on Monday, with domestic factors also in the mix for both, while European currencies were largely unmoved. Against the yen, the dollar was up 0.35% at 153.98 yen, back threatening the nine-month highs it reached earlier in the month. The Aussie dollar was up 0.55% on the dollar at $0.6532 and up more than 1% on the yen. That pair is sometimes used as a barometer of sentiment towards global growth, and often moves in line with equity markets, which were higher on Monday. [MKTS/GLOB] The U.S. Senate on Sunday moved forward on a measure aimed at reopening the federal government and ending the shutdown. While it was a procedural vote, a handful of Democrat lawmakers have agreed a deal with the Republicans, and President Donald Trump said it looked "like we’re getting very close to the shutdown ending". On prediction market Polymarket, the implied probability that the shutdown would end before November 15 surged to 92%. "A deal to end the government shutdown could spark a meaningful market reaction, primarily by reducing data uncertainty and lifting investor sentiment," said Lloyd Chan, senior currency analyst at MUFG in Singapore. Were the shutdown to be lifted the focus would shift to U.S. economic data, most importantly non-farm payrolls data, which has not been released since government operations ground to a halt more than a month ago. Market pricing currently reflects around a 60% chance of a Federal Reserve interest rate cut in December, although that pricing could shift sharply in either direction once the data comes through. That uncertainty kept the dollar in check against European currencies. The euro was last at $1.1567, sterling at $1.3157 and the Swiss franc at 0.806 per dollar, all effectively flat. There were also domestic factors shaping both the yen and Aussie dollar. Japanese Prime Minister Sanae Takaichi on Monday said she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down the country's commitment to fiscal consolidation. Separately, the Bank of Japan's summary of opinions on Monday also said that the "fog surrounding Japan's economic outlook has begun to clear compared with July," potentially paving the way for a rate hike in December. Meanwhile Reserve Bank of Australia Deputy Governor Andrew Hauser said the country's financial conditions are closer to a neutral rate of interest – one that is neither stimulative nor a drag on the economy. "The speech, which came across as hawkish, propelled the Australian dollar higher," said analysts at Westpac in a note. (Reporting by Gregor Stuart Hunter in Singapore and Alun John in London; Editing by Kim Coghill and Hugh Lawson)

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