Investing.com — The U.S. dollar was on course for its strongest weekly gain since mid-June on Friday, supported by a surge in oil prices, while the Japanese yen headed for its steepest weekly decline in more than two months as it hovered near 40-year lows despite repeated intervention warnings from Tokyo.
Japanese Finance Minister Satsuki Katayama reiterated on Friday that authorities remained prepared to act in the foreign exchange market, but the comments did little to lift the yen, highlighting investors’ skepticism over the effectiveness of verbal intervention alone.
The fell 0.04% to 101.40. Despite the daily dip, it was up nearly 0.7% for the week, putting it on track for its biggest weekly gain since mid-June.
Against the yen, the dollar edged down 0.04% to 163.78 but remained up almost 0.9% for the week, its strongest weekly advance since May 15. Earlier on Thursday, the greenback touched 163.98, its highest level against the Japanese currency since November 1986.
Tariffs and oil revive inflation fears, lifting the dollar
The pair traded lower as the greenback extended its lead, building on gains made after the European Central Bank left benchmark rates unchanged a day earlier.
While Frankfurt maintained a meeting-by-meeting approach, the divergence in rate expectations between the two sides of the Atlantic has widened. Swaps markets now reflect a near-certainty that the Federal Reserve will raise interest rates at its September policy meeting to curb fresh inflationary pressures.
The dollar’s upward trajectory is being propelled by a dual inflationary shock from international trade policy and energy markets.
President Donald Trump’s new tariff regime took effect on Friday, replacing an expiring temporary 10% global duty with fresh levies ranging between 10% and 12.5% on imports from 60 major trading partners, including the European Union.
Concurrently, held above $100 per barrel following renewed strikes on shipping channels in the Red Sea and Persian Gulf, raising concerns that higher import costs and energy bills will keep headline inflation elevated.
Politburo, Fed and regional central banks in focus
Elsewhere, the Australian and New Zealand dollars steadied after sharp overnight losses, while China’s yuan traded little changed as investors looked ahead to next week’s Politburo meeting for fresh policy signals.
Markets expect Beijing’s leadership to unveil additional support for employment and household consumption following softer second-quarter economic data, alongside further details on China’s long-term consumption strategy under the 15th Five-Year Plan. Investors will also monitor China’s July manufacturing PMI for signs of whether factory activity is stabilising.
Attention will then turn to the Federal Reserve and the Bank of Japan later in the week, with traders assessing whether higher energy prices, fresh U.S. tariffs and persistent inflation pressures could further delay the global monetary easing cycle.
(Roshni Nair and Pranav Kashyap contributed reporting)
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