Yen Climbs to Two-Month High Amid Rising Inflation
The Japanese yen reached its highest value in two and a half months during early trading on Friday, driven by a significant uptick in inflation within Japan. This development has put the U.S. dollar on track for a decline for the third consecutive week, as market participants react to the ongoing threats surrounding Donald Trump’s potential second term.
The yen successfully breached the resistance level of 150 against the dollar last night and continued its ascent, trading at 149.285 against the dollar in morning sessions across Asia. This rise coincides with Japan experiencing its fastest inflation growth in 19 months, as reported for January.
Adding to the market dynamics, the euro appreciated by 0.8% overnight, stabilizing at $1.0498 in Asia, as traders keenly await the upcoming elections in Germany at the beginning of the week. Current opinion polls suggest a probable conservative coalition outcome.
The dollar has faced considerable losses as investors exhibit reluctance to hold long positions amid escalating trade tensions. This uncertainty stems from Trump’s inconsistent approach regarding tariffs and trade relations.
Recently, Trump imposed an additional 10% tariff on Chinese goods and indicated plans to reinstate tariffs on steel and aluminum imports. However, he has suspended the proposed tariffs on Canadian and Mexican imports, while numerous other tariff threats remain unaddressed.
Since the beginning of February, the yen has appreciated by 3.6% against the dollar, fueled by expectations that the Bank of Japan may raise interest rates by 25 basis points by September.
Moreover, Trump’s remarks regarding a potential trade agreement with China have positively influenced the Australian and New Zealand dollars, both of which are sensitive to trade-related developments.
The dollar index hit a low of 106.29 recently, marking its lowest level in 2025. It has since recovered slightly to 106.45 in the latest trading round.
The New Zealand dollar rose to $0.5772 this Friday morning, while the Australian dollar surpassed the 64 cents mark for the first time this year, reaching $0.6404.
In the realm of British currency, the pound achieved its highest value since mid-December, trading at $1.2674.
