Dollar Up Against the Yen and Other Currencies on Strong U.S. Economy

Key Takeaways

• Upbeat U.S. economic data drives the dollar higher against other major currencies
• Inflation concerns ease as U.S. business activity surges in June
• Matt Weller, head of market research at StoneX, predicts a focus on the yen for FX traders in the next week

Reuters reported that the dollar hit a new eight-week high against the yen Friday and edged higher against other major currencies, supported by the strength of the U.S. economy and the Fed's sluggishness on interest rate cuts. 

Matt Weller, Head of Market Research at Forex.com was quoted in the report that he expects the Japanese yen will have the full attention of FX traders in the coming week. Weller noted Japan was recently added to a list of countries the U.S. Treasury monitors for suspicion of being a currency manipulator. He called this "a diplomatic warning against additional intervention." China is also on the list. 

Meanwhile, June saw U.S. business activity rise to a 26-month high amid a rebound in employment and subsiding price pressures, indicating that inflation easing could continue. 

The dollar index was up 0.2% at 105.81 in New York afternoon trade Thursday. Some experts see continued strength in the dollar, with political uncertainty in Europe possibly sapping business and hurting consumer confidence. 

The Bank of Japan's decision last week to hold off on lowering bond-buying stimulus has increased pressure on the yen. 

At the finance ministry's request, the Bank of Japan reportedly spent nearly 9.8 trillion yen to revive the currency from a 34-year slump recently.  Meanwhile, the dollar held a five-week high against sterling, which remains flat at $1.2649, around its lowest since mid-May. 

The euro was also flat at $1.0697 after a series of preliminary June surveys showed service-sector activity in France contracted this month, while activity across the German economy slowed.

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