Dollar Rally Pauses, Yen Gains on BOJ Rate Hike Talk
The dollar's rally took a break as traders awaited the US inflation report. The yen strengthened against the dollar on expectations of a potential rate hike by the Bank of Japan (BOJ).
BOJ Governor Kazuo Ueda's comments about raising rates if economic conditions improve fueled the yen's rise. Markets now anticipate a 70% chance of a 25-basis-point hike next week.
The US inflation report showed a 0.2% increase in core consumer prices for December, potentially limiting the scope for Federal Reserve rate cuts this year.
The euro remained above its recent two-year low, while sterling fell under pressure from rising borrowing costs and concerns about the UK's fiscal health.
Analysts believe the impact of the inflation report on currencies will be short-lived, as the market's focus remains on President-elect Donald Trump's policies, particularly regarding tariffs.
The Australian dollar held onto some of its overnight gains, while the New Zealand dollar dipped slightly.
5 Comments
Pupsik
The rising borrowing costs in the UK are a sign of a bigger problem, not something we should ignore.
Marishka
Happy to see some cautious optimism in the markets! Let's hope for a bright economic future.
Pupsik
Go BOJ! If they raise rates, it might set the stage for a stronger recovery in Japan.
Marishka
The euro may be above two-year lows, but it's still weak overall. We’re looking at a shaky economy.
Pupsik
Interest rate changes always create waves in the currency market; this is just part of the cycle.