The US economy is growing strongly, the dollar is rising and the yen is still hovering near the warning line
The dollar rose on Friday, helped by strong US economic growth data that bolstered the case for higher long-term interest rates, while the yen hovered in the weak 150 range.
The US economy grew at its fastest pace in nearly two years in the third quarter as rising wages amid a tight Labour market helped boost consumer spending, data showed on Thursday.
That increased bets that the Fed could keep monetary conditions constrained for longer, driving the dollar broadly higher against a basket of currencies. The dollar index steadied at 106.57 after hitting a three-week high of 106.89 in the previous session, on track for a weekly gain of about 0.4%.
Crystal, head of investment at Vontobel Asset Management, said: "Certainly the US economy is much more resilient than most people expected. This is both a blessing and a curse for the Fed. But certainly the chances of a soft landing look better than most people expected."
The European Central Bank left interest rates unchanged as expected on Thursday, ending a string of 10 rate rises. The euro fell 0.02% to $1.0560.
Julian, chief market strategist at Barclays Private Bank, said: "As the October PMI data shows, with the macroeconomic situation deteriorating rapidly, we think the ECB will have to tread very carefully as we enter 202 and have no choice but to lower interest rates."
Data earlier this week showed an unexpected deterioration in eurozone business activity this month. The dollar also got a boost from some safe-haven flows, analysts said, as Asia continued Wall Street's cautious risk mood, sending stocks tumbling and sustaining buying in Treasuries.
Tony Sycamore, market analyst at IG Group, said: "The fall in yields has to do with investors turning to safe haven assets as last night was quite disruptive for equity markets. Over the past few weeks... We are seeing a lot of unrest and we are not quite sure what is going to happen in Gaza until the weekend."
The yen (JPN) remains in focus for investors, with the yen last trading at 150.38 against the dollar, hovering near the previous session's one-year low of 150.78.
Data on Friday showed core consumer inflation in Tokyo unexpectedly accelerated in October, piling pressure on the Bank of Japan.
The Bank of Japan is scheduled to meet next week, and speculation is growing that the central bank may change its bond yield controls and raise the existing yield ceiling set three months ago.
Tony Sycamore, market analyst at IG Group, said: "If the dollar/yen rises to 151 next Monday, then I think there is a greater chance that they will raise the ceiling." The higher the USD/JPY moves during this period, the more likely a correction becomes."
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