Currency Market Volatility: Dollar Climbs, Yen Wavers

The dollar hovered near a three-month high on Tuesday as a divided Federal Reserve prompted traders to rein in interest rate cut wagers. Meanwhile, the Japanese yen recovered slightly from near eight-month lows following verbal warnings from Tokyo officials.

The Federal Reserve's lack of consistent economic data, impacted by the ongoing government shutdown, has left market participants speculating. Chair Jerome Powell's suggestion that last week's rate cut might be the year's final adds to uncertainty, as traders still see a 65% chance of another cut in December.

The varying expectations among traders have pushed the dollar index above 100, lifting the U.S. currency against other units. In contrast, the Australian dollar fell by 0.44%, influenced by the Reserve Bank of Australia's cautious stance on further easing due to rising inflation and consumer demand.