Dollar near 2025 lows as bulls get nervous; yen retreats
The dollar headed for a third straight weekly drop on Friday as traders reasoned the start of Donald Trump's second term has been mostly bluster on tariffs, and knocked the yen back from a 2-1/2-month high driven by a jump in Japanese inflation.
The euro stumbled after a series of business activity surveys showed a sharp contraction in early February in France and only mild improvement in Germany - the euro zone's traditional twin engines of growth.
The yen rallied beyond the 150-per-dollar mark, as a selloff in Japanese government bonds drove yields to 2009 highs after national core inflation hit a 19-month peak in January, fuelling expectations for more interest rate rises in Japan.
Bank of Japan (BOJ) chief Kazuo Ueda quickly doused the momentum, saying the central bank could contain long-term interest rates by buying government bonds.
Aside from Friday's leg-up against the yen, the dollar has been struggling for traction in the past few weeks. The index has fallen 1.8% in February, heading for its biggest monthly slide since September.
Drilling down, the dollar was up 0.6% on the day against the yen, which on Thursday staged its biggest one-day rally in nearly three months, with a gain of 1.23% .
Friday's data that showed Japan's core consumer price index rose by an annual 3.2% against expectations for 3.1% added to the case for higher Japanese rates at a time when the rest of the world might be cutting, which ultimately supports the yen.
The yen has gained about 3.2% so far in February. Another quarter-basis point rate hike is not fully priced in until September, although interest rate markets have factored in a slight chance of a hike as soon as May .
The euro was down 0.2% at $1.0479, set for a 1.1% rise this month. Against a basket of the currencies of the euro zone's major trading partners, the euro is down 0.5% and heading for a fifth straight monthly decline .
The threat of U.S. tariffs, a flat-lining economy and Trump's push to make European countries more self-reliant on defence, are having an impact.
The pound held around two-month highs, trading at $1.2654, after data showed UK retail sales rose more than expected in January.
Source: Reuters
