Yen Surges, Euro Hits Year-High as Dollar Weakens Ahead of Fed Moves

The yen surged and the euro reached its highest level this year as the dollar retreated. Traders anticipate dovish signals from the Federal Reserve, with focus on Chair Jerome Powell's upcoming speech and the Fed's July meeting minutes. Market movements are also influenced by inflation data and Purchasing Managers' Index readings.

The yen experienced a significant rise on Monday, while the euro touched its highest value this year, driven by a broadly weakening dollar. Traders are bracing for potential dovish shifts highlighted in the upcoming Federal Reserve meeting minutes and Chair Jerome Powell's speech at Jackson Hole.

The Fed's July meeting minutes, expected on Wednesday, along with Powell's Friday speech, are anticipated to be key currency drivers this week. Additionally, upcoming inflation data from Canada and Japan, along with Purchasing Managers' Index readings across the U.S., euro zone, and UK, add to the market dynamics.

Analysts attribute the dollar's approximately 1% decline against the yen to broad dollar weakness and prospective policy divergence between the U.S. and Japan. Insights from BOJ Governor Kazuo Ueda and dovish expectations from Powell further shape market outlooks.

(With inputs from agencies.)