Yen struggles before BOJ decision; dollar steady ahead of US jobs report

The yen remained under pressure on Thursday as the Bank of Japan looked set to keep ultra-low interest rates steady, while the US dollar paused ahead of jobs data later this week and the US presidential election next week.

The Japanese currency has taken a beating this month as the dollar and US Treasury yields have hovered around their highest since July.

The yen has fallen more than 6 per cent in October and is on track for what would be its biggest monthly loss against the greenback since November 2016.

Japan's political shakeup has only added to the yen's woes, heightening uncertainty about the country's fiscal and monetary policy outlook.

The Bank of Japan is widely expected to stand pat on Thursday and signal a cautious approach, as political uncertainty and jittery markets cloud the outlook.

Still, analysts are divided over the prospect of additional hikes by year-end, putting focus on BOJ Governor Kazuo Ueda's post-meeting briefing for clues on the pace and timing of further rate increases.

The yen was down 0.05 per cent at 153.49 versus the dollar, not far off a three-month low of 153.885 hit on Monday.

"Any strengthening of the yen at present would likely result from a general weakening of the US dollar if interest rates begin to align," said Sean Teo, a sales trader at Saxo.

The recent decline in the yen may be making many traders cautious given that excessive weakening could grab the attention of Japanese authorities, he added.

Markets got more economic data from China ahead of the BOJ's decision, with the National Statistics Bureau's manufacturing PMI showing activity in October expanded for the first time in six months.

The official PMI rose to 50.1 in October from 49.8 in September, just above the 50-mark separating growth from contraction and beating a median forecast of 49.9 in a Reuters poll.

The offshore yuan held steady, last trading at 7.1325.

Jobs Report, Presidential elections in focus  US nonfarm payrolls closes out the week on Friday in the run-up to the presidential election on Tuesday.

Some investors have been putting on trades betting Republican candidate Donald Trump will win, although he is still neck and neck with Vice President Kamala Harris in several polls.

The dollar index, which measures the currency against six major rivals, rose 0.08 per cent to 104.17, after softening the previous day. It hit its highest since July 30 at 104.63 on Tuesday.

"Data overnight reaffirmed the underlying strength of the US economy, largely supporting what's already built into the price rather than providing a fresh catalyst for a renewed push higher," Westpac analysts wrote in a note.

US private payroll growth surged in October, data showed on Wednesday, overcoming fears of temporary disruption from hurricanes and strikes.

Meanwhile, separate data showed the US economy grew at an annualised rate of 2.8 per cent in the third quarter, slightly lower than the 3 per cent expected by economists.

The euro edged down 0.07 per cent to $1.08465 after rising as high as $1.0871 on Wednesday. Regional inflation data and euro zone GDP came in stronger than expected on Wednesday, leading traders to trim back bets on an outsized rate cut from the European Central Bank in December.

Sterling stood at $1.2951, down 0.08 per cent so far on the day.

Elsewhere, the Australian dollar slid 0.06 per cent to $0.65675 after domestic retail sales numbers for September missed estimates, inching up just 0.1 per cent. Analysts had looked for a gain of 0.3 per cent in September.

The New Zealand dollar ticked up 0.13 per cent to $0.598.