US Dollar Holds Near 13-Month High
The US dollar traded close to its highest level in more than a year on Friday. Investors assessed the Federal Reserve’s more hawkish policy outlook while monitoring developments surrounding the US-Iran peace agreement.
The US Dollar Index gained 0.1% during Asian trading after rising 0.8% in the previous session. The index reached its highest level since mid-May 2025 and was on course to record a weekly gain of around 1.2%.
Federal Reserve Outlook Supports the Dollar
The dollar remained firmly supported after the Federal Reserve signalled that interest rates could rise again later this year.
Policymakers projected a more restrictive path for monetary policy, prompting traders to increase their expectations for another rate hike. Markets are now pricing in a strong probability of at least one interest-rate increase by December.
The shift pushed US Treasury yields higher and strengthened demand for the greenback. As a result, the dollar index remained close to a 13-month peak and continued to pressure other major currencies.
US-Iran Geneva Talks Suspended
Geopolitical developments in the Middle East also remained in focus. US Vice President J.D. Vance reportedly suspended planned Geneva talks connected to the US-Iran peace process.
The decision raised doubts about the durability of the recently announced interim agreement between the two countries.
The agreement had previously reduced concerns about possible disruptions to oil shipments through the Strait of Hormuz. However, traders remained cautious because of continuing geopolitical uncertainty.
Reports suggested that Iranian negotiators wanted evidence that the United States was implementing the interim agreement before moving forward with additional discussions.
Japanese Yen Nears a 40-Year Low
The Japanese yen remained under heavy pressure, with the USD/JPY exchange rate trading near 161.39. The pair had climbed to 161.82 during the previous session, pushing the yen close to its weakest level in nearly four decades.
A widening gap between US and Japanese bond yields continued to favour the dollar. This pressure persisted despite the Bank of Japan’s recent move to tighten monetary policy.
Investors also remained alert for possible currency-market intervention by Japanese authorities.
Japan Inflation Remains Below BOJ Target
Official data released on Friday showed that Japan’s core consumer price index increased by 1.4% year-on-year in May. The reading matched market expectations.
However, core inflation remained below the Bank of Japan’s 2% target for the fourth consecutive month.
Fuel subsidies continued to limit headline inflation. Nevertheless, analysts said underlying price pressures and the BOJ’s recent interest-rate increase could leave room for further monetary tightening later this year.
