Laura Matthews

NEW YORK (Reuters) – The U.S. dollar weakened against the yen on Thursday on softer-than-expected U.S. economic data and growing confidence in the Bank of Japan’s interest rate hike, sending the U.S. dollar to its lowest level in almost a month versus Japanese currency.

Recent remarks by BOJ Governor Kazuo Ueda and his deputy Ryozo Himino have made it clear that the raise will at least be discussed at next week’s policy meeting. Markets see about a 79% chance of a 50 basis point hike. [IRPR]

Data on Thursday showed Japan’s annual wholesale inflation held steady at 3.8% in December on persistently high food costs.

The dollar fell 0.81% against the yen to 155.2, the lowest since December 19.

“We anticipated that the performance of the U.S. dollar would be mixed, that () it would likely be stronger relative to many currencies, but would be weaker relative to the Japanese yen,” said Kristina Hooper, chief global market strategy officer at Invesco US. “I think “The general direction for the yen and the general direction for the dollar suggest that we will have a stronger yen against the dollar.”

The dollar was weaker against the euro, which gained 0.1% to $1.03 as investors digested a slew of mixed economic news to gauge the prospects for Federal Reserve interest rate cuts this year.

U.S. retail sales rose 0.4% last month after upward revisions from the previous month, according to data from the Commerce Department’s Census Bureau.

Meanwhile, the number of Americans filing new claims for unemployment benefits rose more than expected last week but remained at levels that indicate a healthy labor market.

The Philadelphia Fed Business Index, which rose to 44.3 in January, was the only surprise, as a reading of minus 5 was forecast.

That left it – a measure of the dollar’s value against a basket of foreign currencies – down 0.05% to 108.97.

Amo Sahota, director of Klarity FX in San Francisco, said Wednesday’s softer consumer price data continues to set the tone for markets, raising expectations that the Fed will continue to push for two rate cuts this year.

However, signs of disinflation emerge as inflation could rise again, depending on the new administration’s trade policies.

“Markets are in a slightly more optimistic mood overall, but the trend here is up until Monday,” Sahota said.

That’s when Donald Trump returns to the White House and, according to some political analysts, will stimulate economic growth and also raise price pressure.

Markets were also focused on Thursday on the nomination hearing for Trump’s pick of Scott Bessent to lead the Treasury Department.

Bessent is expected to keep a tight leash on the U.S. deficit and operate tariffs as a negotiating tool, mitigating the expected inflationary impact of economic policies expected from the Trump administration.

“He hasn’t said anything so far that deviates from our expectations,” Sahota said. “This is the government… that has to solve the spending issue. We therefore expect government spending to decline. They really want to bring back the tax cuts, we saw that headline.”

Traders who are increasingly concerned about inflation reacted with relief to Wednesday’s U.S. data, buying stocks and causing the benchmark 10-year Treasury yield to fall by more than 13 basis points.

Treasury yields fell Thursday after Federal Reserve Gov. Christopher Waller said three or four interest rate cuts this year are still possible if U.S. economic data continues to weaken.

Sterling fell 0.13% to $1.2228 against the dollar, after also falling sharply against the yen on Thursday as investors focused on monetary policy divergences following last week’s sell-off in Treasuries and the pound.

seen on the front line of tariff risk, it was near the delicate end of the trading band at 7.3316. [CNY/]

Currency

offer

prices per hour

16

January

08:54

afternoon GMT

Description RIC Last US Pct YTD Pct High Low

to Close Change offer Offer

Previous

Session

Dollar 108.96 109.03 -0.05% 0.43% 109.4 108.

index 82

Euro/Dollar 1.0299 1.029 0.1% -0.51% 1.0315 $1.0

it’s the 26th

Dollar/Ye 155.19 156.505 -0.83% -1.36% 156.42 155.

No. 135

Euro/Yen 159.84 160.97 -0.7% -2.07% 161.08 159.

77

Dollar/Sw 0.9111 0.9129 -0.18% 0.41% 0.9142 0.91

Is

Sterling sterling/ 1.223 1.2245 -0.09% -2.19% 1.226 $ 1.2

Dollar 173

Dollar/Katwa 1.4393 1.4339 0.39% 0.1% 1.4403 1.43

nadian 24

Australian/Up to 0.621 0.6227 -0.24% 0.39% 0.6248 USD 0.6

192

Euro/Swiss 0.9382 0.9389 -0.07% -0.12% 0.9394 0.93

71

Euro/Christmas 0.8418 0.8402 0.19% 1.75% 0.8438 0.84

ling 07

New Zealand 0.5606 0.5616 -0.11% 0.25% $0.5633 0.55

Dollar/Up to 82

ll

Dollar/No 11.3595​ 11.3256 0.3% -0.05% 11.4002 11.3

road 108

Euro/Norway 11.701 11.6542 0.4% -0.58% 11.714 11.6

it’s 48

Dollar/Sw 11.1507 11.1536 -0.03% 1.21% 11.1937 11.1

Eden 288

Euro/Sweden 11.485 11.4806 0.04% 0.16% 11.499 11.4

in 75