Dollar Holds Firm Amid Policy Uncertainty and Yen Strengthens

The U.S. dollar remained stable despite falling bond yields, with focus on Trump's inauguration and potential policy impacts. The yen rose on expectations of a Bank of Japan rate hike. Markets reacted to U.S. inflation data, while the dollar index inched up slightly amid policy uncertainties.

The U.S. dollar managed to stay steady on Thursday, despite a notable drop in U.S. bond yields after recent inflation data. All eyes are on Donald Trump's upcoming inauguration and the potential inflationary consequences of his policies.

The dollar index increased slightly by 0.1%, standing at 109.12, as markets remain wary before new policy announcements. Paul Mackel, global head of foreign exchange research at HSBC, highlighted the prevailing caution due to policy unpredictability.

On the other hand, the yen reinforced its position against the dollar and euro, bolstered by expectations of a Bank of Japan rate hike. Discussions are anticipated next week about monetary policy adjustments from BOJ officials, potentially impacting the yen's performance.

(With inputs from agencies.)