The U.S. dollar reached a new eight-week high above 159 yen and remained close to a five-week peak against the British pound on Friday. This performance is attributed to the Federal Reserve's cautious approach to reducing interest rates, which contrasts with the more dovish stances of other central banks.
The dollar index, which tracks the currency against six major counterparts including the yen, pound, euro, and Swiss franc, surged 0.41% overnight, turning positive for the week. This followed a second consecutive rate cut by the Swiss National Bank and hints from the Bank of England about a possible rate reduction in August.
Meanwhile, the yen continued to weaken after the Bank of Japan's decision last week to delay reducing its bond-buying stimulus until the July meeting.
"The BOJ's timeline is sharply out of sync with the markets, and this misalignment will likely force the BOJ to act to support the yen (via currency intervention) sooner than it might have needed to," Sycamore said.
Last year, the BOJ, under the guidance of Japan's finance ministry, spent around 9.8 trillion yen ($61.64 billion) to pull the currency back from a 34-year low of 160.245 per dollar, reached on April 29.
Due to this intervention, the U.S. Treasury on Thursday added Japan to a list of countries being monitored for potential designation as a currency manipulator, with China also on the list.
Nonetheless, Japan's top currency diplomat Masato Kanda emphasized on Friday that Tokyo is prepared to take further "resolute" action against "speculative, excessive volatility".
The dollar last traded 0.05% higher at 159.015 yen.
The U.S. currency also gained 0.07% to 0.89165 Swiss franc, following a 0.78% surge overnight.
The dollar index was steady at 105.66, heading for a slight weekly gain that would extend its winning streak to three weeks.
Sterling remained flat at $1.2657, close to the $1.2655 low from Thursday, a level last seen on May 17. The Bank of England kept rates on hold, but some policymakers indicated that the decision not to cut was "finely balanced."
The euro edged 0.06% higher to $1.0708, attempting to recover from Thursday's 0.39% slide. The European Central Bank initiated its rate-cutting cycle earlier this month.
Fed officials, meanwhile, left policy unchanged at their June meeting and reduced previous projections for three quarter-point cuts this year to one, even as inflation has cooled and the labor market has eased.
Paraphrasing text from "Reuters" all rights reserved by the original author.
