The U.S. dollar gained on Friday, buoyed by encouraging employment data, while the Japanese yen firmed following a relatively hawkish Bank of Japan meeting.
By 04:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against six major currencies, rose 0.2% to 97.175, recovering from its earlier decline to a February 2022 low.
Dollar Supported by Weekly Jobless Claims
The dollar strengthened after data showed a drop in new U.S. unemployment claims last week, reversing the previous week’s spike. Initial claims fell by 33,000 to a seasonally adjusted 231,000 for the week ending September 13, following a jump to 264,000 in the prior week—a level last seen in October 2021.
“This was rare positive news on the jobs market, and one that justifies the dollar’s staying bid for now,” said analysts at ING in a note.
The data helped the dollar recover after the Federal Reserve cut rates on Wednesday for the first time this year and signaled the possibility of two additional cuts in 2025.
“That said, we still think the dollar is trading too much on the strong side after the Fed meeting and expect some pullback in the coming days. Cheaper funding costs should contribute to fuel hedging demand for the USD and prevent larger appreciative trends,” ING added.
Market participants are also monitoring political developments, with the U.S. Supreme Court scheduling November 5 for hearings on the legality of Trump’s global tariffs. Trump has repeatedly criticized the Fed for not cutting rates more aggressively, raising questions about the central bank’s independence. On Thursday, his administration asked the Supreme Court to allow the president to dismiss Federal Reserve Governor Lisa Cook—an unprecedented move.
Sterling and Euro React to Local Events
In Europe, GBP/USD fell 0.5% to 1.3490 after Britain’s borrowing surged past forecasts underlying government fiscal plans. The previous day, the Bank of England held interest rates steady and slowed its government bond reduction program.
EUR/USD slipped 0.1% to 1.1773 amid political unrest in France, where hundreds of thousands protested austerity measures, urging Prime Minister Sebastien Lecornu to halt planned budget cuts.
“Their latest political news isn’t very encouraging, as the new prime minister is facing harsh union opposition to his fiscal plans, and negotiations with the Socialists – who are believed to hold the key to passing the budget – have not yielded good results so far,” ING said.
Yen Strengthens After BoJ Policy Meeting
USD/JPY declined 0.1% to 147.88, with the yen benefiting after the Bank of Japan kept rates at 0.5% as expected. Two of the nine board members, however, advocated a 25 basis-point hike. The central bank also announced plans to sell its large holdings of ETFs and REITs, a hawkish signal as the BOJ begins trimming its balance sheet after nearly a decade of ultra-loose monetary policy.
Other currencies were relatively stable. USD/CNY traded around 7.1122, with the yuan near a 10-month low. Beijing plans additional stimulus to support private consumption following weak August economic data. AUD/USD edged down 0.1% to 0.6606 after recent 10-month highs, while NZD/USD fell 0.2% to 0.5874, continuing a decline after its sharpest one-day drop since April amid weak Q2 GDP figures.
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