The Japanese yen soared to a 2.5-month high on Friday, strengthening to 149.285 per dollar, following a sharp rise in Japan’s core inflation, which hit a 19-month high of 3.2% in January. This bolstered expectations of a rate hike, pushing the yen up 3.6% against the dollar in February.
Meanwhile, the U.S. dollar faced its third consecutive weekly decline as traders reconsidered their bullish bets. Despite imposing a 10% tariff on Chinese goods and reintroducing steel and aluminum levies, Donald Trump has yet to follow through on broader tariff threats, causing investors to unwind long-dollar positions. The dollar index hit a 2025 low of 106.29 before settling at 106.45.
The euro remained steady at $1.0498 ahead of Germany’s upcoming election, where a conservative coalition is expected to win. The British pound reached a mid-December high of $1.2674. In Asia-Pacific, the Australian and New Zealand dollars climbed to their highest levels this year, despite recent rate cuts. The Aussie crossed $0.64, and the kiwi hit $0.5772.
Japanese government bonds were sold off as markets priced in a potential 25-basis-point rate hike by September. Meanwhile, comments from U.S. Treasury Secretary Scott Bessent, stating that there are no plans to increase long-term debt issuance, weighed on U.S. yields and the dollar.
China’s yuan hit a one-month high after Trump mentioned a possible visit from President Xi Jinping, though no timeline was given. In offshore trading, the yuan remained steady at 7.2419 per dollar.
Investors are now closely watching global purchasing managers’ index (PMI) releases later in the day for further economic signals.
