Dollar edges higher as economic storm clouds gather

Shafaq News / The dollar hovered around seven-month lows on Friday as a slew of data feeds concern among investors that an economic slowdown could be unavoidable, while a bout of profit-taking forced the yen to retreat.

The dollar edged up 0.2% against a basket of other major currencies to 102.17, holding narrowly above Wednesday's seven-month lows.

The index has fallen 1.3% this year after sinking 7.7% in the last three months of 2022, when investors began attaching a higher chance of the Federal Reserve slowing down the pace of interest-rate rises.

The Japanese yen bore the brunt of the dollar's strength. The dollar rose by as much as to 129.26. The yen, which investors have long been favoured as a safe-haven and a funding currency, has had a volatile few weeks.

Speculators are betting that the Bank of Japan, the last major central bank to still employ loose monetary policy, is edging towards a shift to a tighter stance. That has driven a rally in the yen that has pushed the dollar/yen currency pair down by 14% in the past three months.

Data on Friday showed Japan's core consumer prices in December rose 4.0% from a year earlier, double the central bank's 2% target.

"Japan now has an inflation problem that it hasn't had in nearly 40 years," CMC Markets chief strategist Michael Hewson said.

"For me, the die is cast - dollar/yen will go lower and it's a question of how quickly," he said.

The BOJ on Wednesday maintained its ultra-loose monetary policy, even though there had been expectations among investors that the central bank could signal a change.

(Reuters)