Dollar's Four-Week High Amid Market Fluctuations

The dollar reached a four-week high against the euro, buoyed by persistent U.S. inflation and expectations of a moderate interest rate cut by the Federal Reserve. Meanwhile, the European Central Bank is poised for a quarter-point rate reduction. The yen's volatility reflects shifting strategies at the Bank of Japan.

The dollar traded near a four-week high versus the euro on Thursday after persistent U.S. inflation reinforced expectations that the Federal Reserve would avoid a super-sized interest rate cut next week. Meanwhile, a quarter-point rate reduction from the European Central Bank (ECB) is widely expected later in the day, leaving investors eager for hints on future cuts.

The dollar also gained against the yen following a tumultuous session where the U.S. currency initially dropped 1.24% before recovering due to consumer price data. Junko Nakagawa, a Bank of Japan board member, hinted at further rate hikes, adding to the volatility.

Other BOJ board members, like Naoki Tamura, suggested that the market's expected pace of tightening might be too slow, which helped mitigate yen losses. According to Shoki Omori from Mizuho Securities, this signifies a change in BOJ's communication strategy, aiming to influence market expectations through forward guidance instead of media outlets.

(With inputs from agencies.)