The U.S. Dollar showed strength on Friday, trading at 158.64 yen after the Bank of Japan decided against a rate hike. Although the BoJ hinted at a tightening cycle later this year, the current 0.75% rate was not enough to prevent the Yen from sliding. This currency movement has given a slight edge to Japanese exporters, nudging the Nikkei higher.
The Greenback is also finding support from domestic U.S. strength. Higher-than-expected consumer spending and a revision of summer GDP growth have painted a picture of an economy that is far from a recession. These factors, combined with steady Treasury yields, are keeping the Dollar as the preferred currency for global investors.
In Europe, the Euro saw a slight dip against the Dollar as trade tensions with the U.S. shifted from “imminent threat” to “uncertain negotiation.” The reversal of tariffs related to the Greenland dispute has calmed the currency markets, though the lack of a signed deal keeps traders from making aggressive bets.
The Japanese bond market provided a dramatic backdrop to the currency fluctuations. After the 40-year JGB yield hit a record 4%, it has since retreated to roughly 3.1%. This stabilization is crucial for the Yen’s long-term health and prevents a total flight of capital from the Japanese market.
As we move into the weekend, the focus remains on whether the Bank of Japan will follow through on its hawkish hints. For now, the Dollar remains king, supported by a “TACO” policy environment in the U.S. that prioritizes market stability over aggressive trade protectionism.