Government bond yields across the Eurozone edged lower on Friday, providing a temporary halt to a sharp sell-off that pushed borrowing costs significantly higher throughout July. The move was driven by month-end portfolio rebalancing as investors await key inflation data.
The Japanese yen weakened after the Bank of Japan maintained its policy rate, erasing gains from a reported government intervention. Meanwhile, the U.S. dollar is on track for a monthly decline amid cooling inflation and uncertainty over the Federal Reserve's path for interest rates.
Citigroup's foreign exchange strategists are advising clients to bet on a rebound in the dollar-yen pair, anticipating the Bank of Japan will disappoint hawkish market expectations at its upcoming meeting.
The Japanese yen rallied sharply against the dollar, pulling back from a 40-year low, in a move widely believed to be direct intervention by Japanese authorities to support the embattled currency.
The pound sterling rose against a weaker U.S. dollar after the Bank of England kept its benchmark interest rate at 3.75%. The decision came via a split 6-3 vote, signaling ongoing debate among policymakers about the path for inflation.
Eurozone government bond yields climbed Thursday as escalating conflict in the Middle East and an ambiguous policy outlook from the U.S. Federal Reserve reignited investor concerns over inflation.
Asian currencies saw limited movement after the Federal Reserve kept rates unchanged but signaled its commitment to fighting inflation, supporting the U.S. dollar. Focus now shifts to upcoming monetary policy decisions from the Bank of England and Bank of Japan.
The Russian currency depreciated to its lowest level against the U.S. dollar since early April, pressured by the conclusion of a domestic tax period and volatile energy markets.
The U.S. dollar's recent resilience will be tested by the Federal Reserve's upcoming rate decision, with ING strategists suggesting a hold could prompt an unwinding of bullish bets and push the currency lower.
