NEW YORK- The dollar surged to a fresh 34-year high against the yen on Friday, bolstered in part by US inflation data that showed no signs of easing, coming in line with forecasts and affirming expectations that the Federal Reserve will likely delay cutting interest rates to later this year.
The dollar’s peak against the yen came after the Bank of Japan kept interest rates steady at its end of its two-day policy meeting, although it flagged future rate hikes. With the yen at multi-decade lows, market participants were on alert for possible intervention from Japan to prop up its currency.
The dollar hit 157.795 yen the highest since June 1990, and was last up 1.3 percent at 157.71. The greenback briefly dropped as low as 154.97 earlier in the session, triggering speculation that the BOJ, which acts on the behalf of the Ministry of Finance, may have checked currency rates, supposedly a sign that the central bank is preparing to intervene.
It was not immediately clear what caused the move.
The greenback was on track for a 2 percent weekly gain against the Japanese currency, the largest since mid-January.
In the United States, the focus was on inflation.
The personal consumption expenditures (PCE) price index rose 0.3 percent in March, compared to a forecast of a 0.3 percent increase, data showed. In the 12 months through March, PCE inflation advanced 2.7 percent against expectations of 2.6 percent .
The PCE price index is one of the inflation measures tracked by the Fed for its 2 percent target. Monthly inflation readings of 0.2 percent over time are necessary to bring inflation back to target.
“While the Friday result wasn’t quite as hot as the whisper number, the stark reality is that short-term trends on the Fed’s favored inflation gauge have steadily headed due north since the start of 2024,” wrote Douglas Porter, chief economist at BMO.
