By Laura Matthews
NEW YORK (Reuters) – The dollar held on to gains against the yen on Friday, but ended the week lower after a six-week winning streak, as investors awaited the establishment of head- Donald Trump's seat and clarity on the course of the incoming administration's policies.
The yen was poised for its strongest weekly performance in more than a month as expectations of a Bank of Japan rate hike next week put the dollar on the back foot.
It climbed more than 1% against the dollar this week, reversing last week's decline, and touched a one-month high of 154.98 per dollar earlier Friday.
The greenback was last up by 0.68% against the yen at 156.165.
“The yen is going to be very married to US rates,” said Brad Bechtel, global head of FX at Jefferies. “I think this cooling that we've seen this week has helped put pressure on the dollar-yen. The BOJ looks set to hike next week, and at the margin, that will be good for the yen. But with interest rate differentials still very wide, it is difficult for the dollar-yen to move much lower.”
Comments from BOJ officials combined with Japanese data showing continued pressure on prices and strong wage growth have helped boost market confidence that a rate move is imminent, with traders pricing in an opportunity 80% increase next week.
Sources also told Reuters that the central bank is likely to raise rates next week, preventing a market shock when Trump takes office.
The dollar has rallied in recent weeks on rising Treasury yields, reflecting expectations that President Trump's policies could boost inflation when the US economy is strong as- Yes.
But bond markets were relieved from a stagnant sell-off after Wednesday's headline US inflation data, as well as comments from Federal Reserve Governor Christopher Waller on Thursday, who said three to four interest rate cuts were still possible this year if the data support that.
This prompted markets to increase their bets on Fed 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 around 40 basis points in US rate cuts in 2025.
“In response to softer-than-expected inflation data last week, market participants increased their expectations for a rate cut from 25 to 40 basis points,” said Uto Shinohara, senior investment strategist at Mesirow Currency Management.
“Notably, these market expectations have returned to levels seen just prior to Friday's strong jobs report, suggesting that the two economic releases effectively canceled each other out.”
It's a pattern that underscores the market's continued sensitivity to both inflation and labor market data, he said.
And as the Federal Reserve enters its dovish period, with few major US economic releases scheduled next week, Shinohara said “the markets will focus on the start of the Trump presidency and the market effects that will come.” ' he could have. “
Investors are now awaiting Trump's inaugural speech on Monday to get a better understanding of his policy measures and the prospect of volatility.
Sterling fell 0.6% to $1.2166, not far from the 14-month low it hit on Monday.
British retail sales fell unexpectedly in December, according to data on Friday that raised the risk of an economic downturn in the fourth quarter.
The euro was down 0.26% at $1.0276.
That left the , which measures the US currency against six other units, up 0.34% at 109.33, away from a more than two-year high touched at the start of the week.
The index was set for a fall of about 0.25% for the week as of the evening session, which would reduce six weeks of gains.
to last trade at 7.3249 per dollar after data showed the world's second largest economy grew 5.4% in the fourth quarter, significantly beating analysts' expectations . The results set full-year 2024 growth at 5%, meeting Beijing's target.
China's currency remains vulnerable to threats of tariffs under the Trump presidency. President Xi Jinping and Trump held a phone conversation on Friday, state media Xinhua reported on Friday.
“The USD remains primarily focused on potential tariff announcements as we move into Trump's first days back in office,” said Dan Tobon, head of G10 FX strategy at Citi.
“Although fees are priced into the FX markets, there is potential for high moves in the USD – both higher and lower – still for next week. …
which hit a four-week high on Friday, last up 5.26% at $105,404.13, amid hopes in the crypto industry that the incoming Trump administration will signal a shift in cryptocurrency policies.
Currency
an offer
prices at
17
January
08:13
pm GMT
Last RIC Description US Pct YTD Pct High Low
on a Closed Change Application
Before
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
at 266
Dollar/Yes 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
there are 96
Sterling/ 1.2165 1.2239 -0.59% -2.72% $1.2245 $1.2
161 dollars
Dollar/ca 1.4466 1.4394 0.51% 0.61% 1.4467 1.43
neon 83
Australia/Do 0.6194 0.6213 -0.28% 0.13% $0.6227 $0.6
165
Euro/Swiss 0.9401 0.9378 0.25% 0.09% 0.9415 0.93
s 68
Euro/Star 0.8443 0.8415 0.33% 2.05% 0.8453 0.84
slim 15
NZ 0.5582 0.5608 -0.4% -0.19% $0.5615 0.55
Dollar/Dollar 64
ll
Dollar/No 11.4486 11.3559 0.82% 0.73% 11.4628 11.3
road 482
Euro/New Zealand 11.765 11.7036 0.52% -0.03% 11.7732 11.6
yes 95
Dollar/Sw 11.1853 11.1464 0.35% 1.53% 11.2066 11.1
bird 242
Euro/Sweden 11.4997 11.486 0.12% 0.29% 11.5088 11.4
in 795
