NEW YORK- The dollar held gains against the yen on Friday, but ended the week lower after a six-week winning streak, as investors await Donald Trump’s presidential inauguration and clarity on the course of the incoming administration’s policies.
The yen was poised for its strongest weekly performance in over a month as expectations for a Bank of Japan rate hike next week grow, putting the dollar on the back foot.
It climbed more than 1 percent against the dollar this week, reversing last week’s decline, and touched a one-month high of 154.98 per dollar earlier on Friday.
The greenback was last up 0.68 percent against the yen at 156.165.
“The yen is going to remain pretty married to US rates,” said Brad Bechtel, global head of FX at Jefferies. “I think this cooling we’ve seen this week has helped take the pressure off dollar-yen. The BOJ seems ready to hike next week, and at the margin, that’ll be positive for the yen. But with interest rate differential still very wide, it’s hard for dollar-yen to really move significantly lower.”
Remarks from BOJ officials along with Japanese data that point to persistent price pressure and strong wage growth have helped boost market confidence that a rate shift is in the offing, with traders pricing in an 80 percent chance of a hike next week.
Sources also told Reuters that the central bank is likely to hike rates next week barring any market shocks when Trump takes office.
The dollar has surged in the past few weeks on the back of rising Treasury yields, reflecting expectations that President-elect Trump’s policies could boost inflation when the US economy is already strong.