Dollar Heads for Strong Week as Yen Steadies on Inflation Data
Most Asian currencies traded in a tight range on Friday, while the U.S. dollar remained on track for a strong weekly performance. The Japanese yen managed to recover slightly after stronger-than-expected producer inflation data, which helped limit recent losses.
The yen was also supported by growing speculation over potential government intervention in currency markets. Several Japanese officials have voiced concern over the yen’s rapid depreciation, fueling expectations that Tokyo could step in to stabilize the currency.
The yen’s weakness—one of the key components of the DXY dollar index—has been a major factor behind the greenback’s strength this week, even as market sentiment toward the U.S. economy remains cautious due to the ongoing government shutdown.
Yen Finds Support After Strong PPI and Intervention Talk
The yen firmed slightly on Friday, with the USD/JPY pair falling around 0.3% from an eight-month high.
Fresh producer price index (PPI) data for September came in stronger than expected, suggesting that inflationary pressures in Japan may be rising.
The reading sparked uncertainty about the Bank of Japan’s (BOJ) next move on interest rates. The central bank has maintained that any hikes will be gradual and aligned with inflation trends.
However, analysts expect resistance from the government, especially with Sanae Takaichi—a known fiscal dove—set to become Japan’s next prime minister.
Her election to lead the Liberal Democratic Party (LDP) triggered a sharp sell-off in the yen, as traders anticipated looser fiscal policy and continued monetary easing.
The yen is still down nearly 4% this week, marking its worst weekly decline since October 2024.
But speculation over currency intervention helped ease pressure on Friday. Finance Minister Katsunobu Kato said the government was concerned about “one-sided, rapid moves” in exchange rates, offering the yen some relief.
Dollar Strength Keeps Asian Currencies in Tight Range
The U.S. dollar index (DXY) and futures slipped 0.1% and 0.2% in Asian trading but remained up more than 1.5% for the week, hitting a two-month high.
Dollar buying was mainly driven by yen weakness and a slide in the euro, which fell amid growing concerns over France’s political turmoil.
While investors still expect the Federal Reserve to continue rate cuts later this year, uncertainty remains about how deep those cuts will go.
The U.S. government shutdown has delayed several key economic reports, adding to market caution about the health of the world’s largest economy.
Most Asian currencies stayed range-bound against the dollar. The Chinese yuan (USD/CNY) and Singapore dollar (USD/SGD) both edged slightly lower, while the Australian dollar (AUD/USD) gained 0.2%.
The South Korean won (USD/KRW) fell 0.1% as trading resumed after a week-long holiday.
Meanwhile, the Indian rupee (USD/INR) slipped 0.1%, with reports suggesting that the Reserve Bank of India intervened to prevent further depreciation toward ₹89 per dollar.
