© Reuters.
Investing.com – The US dollar rose in early European trade on Friday, rebounding from heavy losses overnight after weak economic data, while the Japanese yen weakened as the Bank of Japan kept interest rates at rock-bottom levels.
At 01:45 EST (05:45 GMT), the US dollar, which measures the greenback against a basket of six other currencies, was trading up 0.1% at 101.787, after falling about 0.8% overnight to New low in one month.
The dollar got a boost earlier in the week when the US projected at least two more hikes this year, despite the pause in a series of rate hikes, with the trend continuing above the central bank’s target range.
But a host of weak economic readings in the US, including a slowdown and a recession, have raised questions about how far the Federal Reserve will raise interest rates.
The Bank of Japan continues to be very accommodative
It rose 0.3% to 140.61, as the yen weakened after the last major central bank meeting of a busy week, repeating its dovish stance at odds with the hawkish policies taken by peers globally.
The BoJ maintained its short-term interest rate target at -0.1% and indicated that it will continue to allow government bond yields to trade within a narrow range of 0.5% to negative 0.5%.
The yen’s losses were limited even though expectations about the Bank of Japan have been largely muted in recent weeks.
“Further strength in USDJPY (possibly driven by carry trade strategies) may prompt Japanese authorities to resume intervention in currency markets, which was deployed around the 145 area last September,” ING analysts said in a note.
“We may not be far from the USD/JPY peak, although it may take some time for the bullish reversal to take place.”
The date of the release of inflation data in the eurozone
It fell 0.1% to 1.0939, retreating from the previous session’s one-month high after a rate hike and optimistic forward guidance from the market.
The ECB chief followed up by saying in the subsequent press conference that another rate hike in July was highly likely and that the central bank still had a “floor to cover” to fend off higher inflation.
With this in mind, the final reading for the Eurozone in May is due later in the session and is expected to show that the index came in at 6.1% on a yearly basis, down from 7.0% in the previous month.
However, excluding volatile energy and food prices, taming is likely to be more difficult, and is expected to decline to 5.3% from 5.6%.
The British pound jumps to the highest level in one year
It traded pretty much flat at 1.2784, after earlier rising to the highest level in more than one year on rising expectations that it is likely to raise interest rates for the 13th consecutive meeting next week.
The latest UK consumer sentiment on inflation and rates is due later in the session, as Britain grapples with one of the highest rates among the major developed economies.
ING added: “The BoE’s interest rate forecasts eased marginally after the Fed meeting, but still point to five rate increases of 25 basis points from current levels before the end of the year.”
Elsewhere, it fell 0.1% to 0.6886, while rising 0.1% to 7.1308, with the yuan holding near a six-month low against the dollar after the People’s Bank of China cut lending rates this week in a bid to boost its ailing economy.