Dollar rallies against yen

The US Dollar extended its rally against the Japanese Yen for the second consecutive day on Friday. The currency pair has erased weekly losses and is nearing 148.00 from Thursday’s lows below 146.00 as US Treasury yields pick up with enthusiasm about this week’s trade deals fading.

Previous market optimism is turning into caution as the market shifts its focus to the monetary policy reports by the Bank of Japan and the US Federal Reserve due next week.

The Fed is widely expected to leave interest rates unchanged, more so after the strong US business activity and Jobless Claims figures released on Thursday.

These data confirmed that the US economy remains resilient with a healthy labour market, which gives further leeway for the Fed to await further insight into the impact of tariffs before resuming rate cuts.

The US Dollar has been trading higher following Thursday’s releases.

Also on Thursday, US President Trump paid an unusual visit to the Federal Reserve, only a few days ahead of their monetary policy meeting. Trump complained about the overcosts of the headquarters’ renovation and pressed for a less restrictive monetary policy, but his unusually soft comments after the visit eased investors’ concerns about the previous attacks on the central bank’s independence.

In Japan, the somewhat softer Tokyo inflation figures seen on Friday and the trade deal would help the BoJ to continue hiking interest rates, but the bank is likely to delay further monetary tightening until the political situation clarifies, keeping the Yen upside attempts subdued in the near-term.

(Source: OANDA)