Yen nears 10-week low, dollar gains on rate speculation

Yen struggles: The Yen hovered near a 10-week low on Friday, while the Dollar edged higher for a fourth consecutive week as traders adjusted their expectations regarding interest rate movements by central banks.

In early Asian trading, the yen remained relatively unchanged at 149.315 per Dollar, after reaching 149.48 late in the previous session, marking its lowest level since November 27.

BOJ Deputy Governor Shinichi Uchida's remarks on Thursday suggested that the Bank of Japan might not rapidly raise rates even after ending its negative interest rate policy, which the market anticipates could happen as soon as next month.

Japanese Finance Minister Shunichi Suzuki expressed vigilance over foreign exchange movements on Friday morning in Tokyo but reiterated that decisions regarding monetary policy lie with the central bank. However, the yen showed little reaction to his warning.

The Dollar index, which measures the currency against six major peers, held steady at 104.15, having gained 0.1 per cent on Thursday following encouraging data on the US labour market. This data further dampened expectations for early rate cuts by the Federal Reserve.

For the week, the Dollar index has climbed 0.18 per cent, supported by robust monthly payroll figures and a hawkish stance from Fed Chair Jerome Powell during a recent "60 Minutes" interview.

The upcoming major US data release is January's Consumer Price Index (CPI) inflation reading scheduled for Tuesday.

Traders currently assign only a 16.5 per cent probability of a rate cut at the Fed's next policy meeting in March, a significant drop from 65.9 per cent odds a month earlier, according to CME Group's FedWatch Tool.

Richard Franulovich, Westpac's head of foreign exchange strategy, expects a potential rally towards 105.50 for the Dollar index, citing resilience in the US economy extending into 2024 and a challenging path towards achieving inflation targets.

Both the euro and sterling remained relatively stable, with officials from the European Central Bank and Bank of England resisting market expectations of early rate cuts.

New Zealand's Dollar strengthened by 0.34 per cent to $0.6117, supported by speculation of delayed Reserve Bank rate cuts or even the possibility of further hikes, following stronger-than-expected job market data.

ANZ anticipates quarter-point rate hikes this month and in April, with February presenting a close call. 

Chief economist Sharon Zollner stressed the importance of meeting inflation targets for the Reserve Bank of New Zealand.

The Australian Dollar remained flat at $0.6491, while the leading cryptocurrency bitcoin traded relatively unchanged around $45,300.

(With Reuters Inputs)