Dollar Hovers Near Two-Week High Against Yen Amid Strong U.S. Economic Data

The U.S. dollar remained close to a two-week high against the Japanese yen on Friday, following its most significant one-day gain against major currencies in four weeks. The rally was driven by robust U.S. economic data, which largely dispelled recession fears.

The greenback also received a boost from a surge in Treasury yields on Thursday, as traders scaled back expectations that the Federal Reserve would need to implement aggressive rate cuts next month. Risk-sensitive currencies, including the British pound, maintained their strength as the improved economic outlook fueled a rally in equities.

The dollar index, which tracks the greenback’s performance against six major peers—including the yen, sterling, and euro—dipped by 0.12% to 102.92 as of 0513 GMT. This followed a 0.41% increase overnight, marking the most substantial gain since July 18.

The dollar edged down by 0.24% to 148.935 yen, slightly retreating from Thursday’s high of 149.40, a level last seen on August 2. Meanwhile, the 10-year Treasury yield slipped by a little over 2 basis points to 3.9035% during Asian trading hours.

On Thursday, the U.S. Commerce Department reported that retail sales rose by 1.0% in the previous month, surpassing expectations of a 0.3% gain. Additionally, data showed that 227,000 Americans filed for unemployment benefits last week, fewer than the anticipated 235,000.

Despite these developments, traders are still anticipating that the Fed will cut interest rates on September 18. However, the likelihood of a larger 50 basis-point reduction has decreased to 25%, down from 36% a day earlier, according to the CME Group’s FedWatch Tool.