By Brigid Riley
TOKYO (Reuters) -The yen climbed to a nine-week high on Friday as market players piled on bets for more interest rate hikes in Japan this year, while the U.S. dollar and other major currencies were little changed ahead of U.S. payroll figures later in the day.
After a volatile week punctuated by back-and-forth market-moving headlines on U.S. tariff threats, traders settled in for the jobs data while keeping a wary eye on geopolitics and U.S. President Donald Trump’s broad policy moves.
The U.S. labour market has remained resilient, with the unemployment rate ticking down to 4.1% in December. Economists polled by Reuters expect the unemployment rate to have remained unchanged last month while projecting the economy added 170,000 jobs.
But analysts warn that January employment data may be difficult to interpret due to annual revisions, while wildfires in California and frigid temperatures in the United States are expected to have held back job growth.
Without any upside surprises in labour data, traders will likely continue unwinding long dollar positions, a shift that has helped boost the yen and other major currencies this week, said Masafumi Yamamoto, chief currency strategist at Mizuho Securities in Tokyo.
The dollar index, which measures the greenback against the yen, sterling and other peers, rose 0.14% to 107.81, but remained far below Monday’s high of 109.88 as investor nerves over global trade war risks eased.
The yen was riding its own wave on expectations of continued rate hikes by the Bank of Japan.
The strong momentum, supported by wage data earlier this week, has the Japanese currency on track for its best week against the dollar since late November.
The currency pair broke below 151 for the first time since December 10 in early Asian trade.
Adding to the higher rate expectations were comments by Bank of Japan board member Naoki Tamura, one of the board’s most hawkish members, who said on Thursday the central bank must raise rates to at least 1% in the latter half of fiscal 2025.
“(Tamura) was a little bit more hawkish than before … I think there is less a chance that the BOJ will delay a rate hike until September,” said Mizuho’s Yamamoto.
Barclays strategists Shinichiro Kadota and Lhamsuren Sharavdemberel anticipate further downside for dollar/yen in the near-term, with focus on the results of Japan’s wage negotiations.
“We expect Japan’s annual spring wage negotiations to produce another solid 5% hike this year while inflation remains above the 2% target, which should keep the BOJ on the hawkish side,” they wrote in a note.
Against the yen, the dollar was last up 0.13% at 151.67.
The early days of the Trump administration have kept investors on edge. Trump at the last minute suspended planned tariff measures against Mexico and Canada this week, but imposed additional 10% levies on imports from China, which quickly announced measures of its own on U.S. imports.
The offshore yuan was around 7.2926 against the dollar, staying within its recent range though downside risks persist.
On the U.S. monetary front, Fed officials are weighing Trump’s policies as they try to figure out where to take interest rates.
Speaking on Thursday, Dallas Fed Bank President Lorie Logan signalled she was ready to keep rates on hold for “quite some time” even if inflation drops closer to the Fed’s 2% goal, as long as the labour market does not falter.
Markets currently see about a 43% chance that the Fed will deliver a quarter-point cut in July, according to the CME FedWatch tool.
Investors are roughly weighing two rate reductions in total for 2025, with around 44 basis points of cuts priced in.
The euro edged down 0.09% to $1.0374, while sterling slid 0.14% to $1.242.
(Reporting by Brigid RileyEditing by Shri Navaratnam and Kim Coghill)
