Laura Matthews
NEW YORK (Reuters) – The dollar continued to gain against the yen on Friday, but ended the week lower after a six-week losing streak, awaiting President Donald Trump’s inauguration and clarity on the modern administration’s policy direction.
The yen was poised for its strongest weekly gain in more than a month as expectations grow for a Bank of Japan interest rate hike next week, putting the dollar on the defensive.
The dollar has risen more than 1% this week, reversing last week’s decline, and earlier on Friday it hit a one-month high of 154.98 per dollar.
The dollar was last up 0.68% against the yen at 156.165.
“The yen will remain fairly faithful to U.S. interest rates,” said Brad Bechtel, global head of foreign exchange at Jefferies. “I think the cooling we’ve seen this week has helped ease the pressure on the dollar-yen. The BOJ appears ready to hike next week and on the margin this will be positive for the yen. However, with the interest rate differential remaining very wide, it is difficult to really significantly reduce the dollar-yen exchange rate.”
Comments from BOJ officials and data from Japan showing continued price pressure and strong wage growth helped increase market confidence that a change in interest rates is imminent, with investors pricing in an 80% chance of a hike next week.
Sources also told Reuters that the central bank is likely to raise interest rates next week, barring any market shocks after Trump takes office.
The dollar has strengthened over the past few weeks as Treasury yields rise, reflecting expectations that President-elect Trump’s policies could increase inflation when the U.S. economy is already strong.
Bond markets, however, took a breather after a sustained sell-off following Wednesday’s soft U.S. core inflation data and Thursday’s comments from Federal Reserve Governor Christopher Waller, who said three or four rate cuts were still possible this year if the data confirms it.
That prompted markets to raise their expectations for Fed interest rate cuts this year, putting some pressure on the dollar ahead of Trump’s return to the White House next week.
Money markets are currently pricing in US interest rate cuts of around 40 basis points in 2025.
“In response to last week’s softer-than-expected inflation data, market participants raised their expectations for interest rate cuts from 25 to 40 basis points,” said Uto Shinohara, senior investment strategist at Mesirow Currency Management.
“It’s worth noting that market expectations have returned to levels seen just before the release of last Friday’s solid jobs report, suggesting that the two economic releases are effectively canceling each other out.”
He added that this is a phenomenon that highlights the market’s continued sensitivity to data on both inflation and the labor market.
And as the Federal Reserve enters a blackout period and several important U.S. macroeconomic releases are scheduled for next week, Shinohara said “markets will be focused on the beginning of the Trump presidency and its potential impact on the market.”
Investors now await Trump’s inaugural address on Monday to better understand his policy steps and expect volatility.
Sterling fell 0.6% to $1.2166, just low of a 14-month low hit on Monday.
UK retail sales unexpectedly fell in December, according to Friday’s data, which raised the risk of an economic slowdown in the fourth quarter.
The euro fell 0.26% to $1.0276.
That sent the index, which measures the U.S. currency against six other units, up 0.34% at 109.33, compared to a more than two-year high reached earlier in the week.
The index was expected to fall about 0.25% in the week starting in the afternoon session, which would mark a six-week streak of gains.
was last trading at 7.3249 per dollar after data showed the world’s second-largest economy grew 5.4% in the fourth quarter, well ahead of analyst expectations. The results showed growth of 5% for the full year 2024, meeting Beijing’s target.
During Trump’s presidency, China’s currency remains vulnerable to potential tariff risks. President Xi Jinping and Trump held a telephone conversation on Friday, state media Xinhua reported.
“As Trump returns to office in the first days, USD remains solely focused on potential tariff announcements,” said Dan Tobon, head of G10 FX strategy at Citi.
“While FX rates are somewhat priced in, the potential for increased USD movements – both higher and lower – will persist next week. …Market participants remain anxious as we wait for more concrete details on Trump’s tariff policy.”
which hit a four-week high on Friday, was last up 5.26% to $105,404.13 on hopes in the crypto industry that the incoming Trump administration will mark a shift in cryptocurrency policy.
Currency
offer
prices per hour
17
January
08:13
afternoon GMT
Description RIC Last US Pct YTD Pct High Low
to Close Change offer Offer
Previous
Session
Dollar 109.35 108.97 0.37% 0.79% 109.4 108.
index 82
Euro/Dollar 1.0274 1.0304 -0.26% -0.73% 1.0331 $1.0
ar 266
Dollar/Ye 156.18 155.21 0.61% -0.76% 156.32 155.
No. 035
Euro/Yen 160.48 159.8 0.43% -1.68% 161.01 159.
74
Dollar/Sw 0.9152 0.9111 0.42% 0.81% 0.9153 0.90
it’s 96
Sterling sterling/ 1.2165 1.2239 -0.59% -2.72% 1.2245 $1.2
Dollar 161
Dollar/Katwa 1.4466 1.4394 0.51% 0.61% 1.4467 1.43
nadian 83
Australian/Up to 0.6194 0.6213 -0.28% 0.13% 0.6227 USD 0.6
165
Euro/Swiss 0.9401 0.9378 0.25% 0.09% 0.9415 0.93
68
Euro/Christmas 0.8443 0.8415 0.33% 2.05% 0.8453 0.84
15
New Zealand 0.5582 0.5608 -0.4% -0.19% $0.5615 0.55
Dollar/Up to 64
ll
Dollar/No 11.4486 11.3559 0.82% 0.73% 11.4628 11.3
road 482
Euro/Norway 11.765 11.7036 0.52% -0.03% 11.7732 11.6
it’s 95
Dollar/Sw 11.1853 11.1464 0.35% 1.53% 11.2066 11.1
paradise 242
Euro/Sweden 11.4997 11.486 0.12% 0.29% 11.5088 11.4
in 795
