Resilient dollar takes a step back, markets still wary of yen intervention risk
Yen and U.S. dollar banknotes are seen in this illustration taken March 19, 2025. REUTERS/Dado Ruvic/Illustration
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LONDON, June 26 : The dollar was a touch softer against other major currencies on Friday as fresh economic data and Federal Reserve comments led markets to pare rate-hike bets, allowing the yen — trading in an intervention danger zone — to find firmer ground.
The greenback was still poised to end the week higher and remains on track for its best month since July 2025, with gains of almost 2.5 per cent.
Thursday’s data showing a key measure of U.S. inflation met economists’ expectations which tempered rate-hike bets. It is expected to stall rather than derail the dollar’s near-term march higher.
“We have had a bit of profit taking, maybe because of month-end but I think this move in the dollar could extend a bit more,” said Nick Kennedy, a currency strategist at Lloyds in London.
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“In aggregate, rate differentials are driving things again.”
The dollar index, which measures the greenback’s strength against a basket of six currencies, was down 0.2 per cent at 101.31. It remains within sight of more than one-year highs hit earlier in the week.
The euro was 0.15 per cent higher at $1.1385, while the British pound was up 0.1 per cent at $1.3201.
Interest rate expectations for major economies have returned to the driving seat in global currency markets, with a strong U.S. economy and hawkish signalling at the June Federal Reserve press conference boosting the dollar.
U.S. money markets are fully pricing in a one quarter-point rate hike by year-end.
Federal Reserve Bank of New York President John Williams said on Thursday that while inflation pressures are likely to moderate this year, they remain too high.
STILL IN THE DANGER ZONE
Japan’s yen strengthened 0.1 per cent against the dollar to 161.62 yen per dollar, rising from a two-year trough of 161.95 on Thursday. Breaching the 161.96 mark would take it to its weakest level since 1986.
The weaker side of 160 is considered by many in the market as a line in the sand for Japanese officials.
Some banks accelerated their timeline for rate hikes from the Bank of Japan after data showed on Friday that core inflation in Tokyo accelerated in June, providing additional support for the yen.
The data suggests “second-round effects from higher oil prices are increasing, while Bank of Japan officials are sounding more hawkish,” analysts from ING wrote in a research note.
“With core prices likely to accelerate going forward, we have brought forward our BOJ rate-hike call to October from December.”
Elsewhere, the Australian dollar eased 0.3 per cent to $0.6895. Bitcoin was up almost 2 per cent at $60,454, recovering some losses after reaching its lowest since September 2024 earlier this week.
Source: Reuters
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