Currency Market Tensions: Dollar Gains Amid Yen Pressure

The U.S. dollar remained robust amid high Treasury yields, while the Japanese yen found little relief despite official warnings. The dollar index edged lower but continued its dominance over major currencies, influenced by the U.S. Federal Reserve's hawkish stance. Experts suggest potential market corrections.

The U.S. dollar experienced a slight slip on Friday, ending a holiday-shortened trading week with a bang, while the yen hovered close to a five-month low. This came as traders digested contrasting messages from the hawkish U.S. Federal Reserve and the cautious Bank of Japan.

As traders bet on prolonged high U.S. interest rates, driven by elevated Treasury yields, the dollar saw gains against major currencies. The dollar index decreased by 0.12% at 107.95, remaining near its recent two-year high. Earlier remarks by Fed Chair Jerome Powell indicated caution regarding further rate reductions.

Despite Japanese officials' intervention to stabilize the yen, it faces a potential fourth consecutive annual decline. Discussions from a recent Bank of Japan meeting reflected varying opinions on rate hikes, juxtaposed against uncertainties in U.S. policies under President-elect Donald Trump.

(With inputs from agencies.)