US dollar rallies on continued trade deal optimism; yen slumps
The U.S. dollar continued to bounce back on Thursday on some technical buying after being oversold last month, with investors more optimistic about tariff deals between the United States and its trading partners.
Volume was thinner than usual, as many international markets were closed on Thursday for the May Day holiday.
The yen, meanwhile, sank as the Bank of Japan lowered growth forecasts due to U.S. tariffs and left interest rates on hold. It dropped to a four-week low against the dollar, which rose 1.7% to 145.52 yen , on track for the greenback's largest daily gain since November 2024.
Against the euro, the yen fell to a four-month low, with the single currency last up 1.4% at 164.29 yen. The euro was on pace for its largest daily rise versus the yen in two months.
The BOJ's decision to hold rates was unanimous and expected, but the downgraded outlook reduced the chances of future hikes. It now expects underlying inflation to reach its 2% target in the latter half of fiscal 2026 and onward, pushing back the timing by a year from its previous projection in January.
The dollar, on the other hand, rose across a broad swathe of currencies, as investors weighed the prospects of trade deals with U.S. partners.
In afternoon trading, the euro fell to a three-week trough versus the greenback and was last down 0.4% at $1.1286 . Sterling also fell 0.4% to $1.3284 .
Against the Swiss franc, the dollar climbed 0.6% to 0.8311 franc .
"It looks like the de-dollarization of the last month has calmed down," said Erik Bregar, director, FX & precious metals risk management, at Silver Gold Bull in Toronto. "Overall, the dollar is following moves in Treasuries. When the bonds sell-off paused, the dollar started gaining as well."
Source: reuters
