Dollar Falls to 8-Week Low Against Yen as Trade War Fears Ease:

Investor worries about trade war inflation entered period of calm which caused the U.S. dollar to drop eight weeks to its yen bottom and stay close to its one-month sterling value on Thursday.

Japan's currency remained strong due to new expectations for Bank of Japan rate increases which received support from their central bank official after wage figures strengthened.

The Bank of England rate cut announcement later in the day failed to affect the steady exchange rate of sterling.

The yen gained 0.5% to reach 151.81 per dollar at 0140 GMT and broke the previous December 12 level.

The exchange rate between sterling and dollars remained at $1.2509 and close to the $1.2550 peak from the preceding session since January 7.

The U.S. dollar index moved to 107.57 while remaining close to its lowest point of 107.29 established at night.

The currency index (109.88) reached its highest point in three weeks following anticipation that Trump would enforce 25% import tariffs on Mexico and Canada but the countries received waivers before Trump applied 10% tariffs to Chinese products.

The offshore version of the yuan exhibited a slight gain to reach 7.2775 per dollar exchange rate.

The Canadian dollar maintained its position at C$1.4321 against the American dollar while reaching its greatest value since December 17 at C$1.4270 overnight. During the week the Mexican peso maintained its value at 20.5789 per dollar.

The FX market seems to be dropping its earlier concern about Mexican and Canadian tariff threats while simply treating China trade tariffs as standard business operations according to Convera senior corporate FX dealer James Kniveton.

Analysts predict two federal interest rate reductions during the current year yet rising odds of no tariff-related inflation contribute to increased flexibility for the Federal Reserve.

Next Friday will showcase the upcoming monthly payrolls figures which serve as the key indicator for U.S. monetary policy assessment.

The price for a 0.25 percentage Fed reduction already exists for July and financial data shows markets predicting 46.3 percentage points of cuts for the December meeting.

Meanwhile, market-implied odds for an imminent BoE rate reduction stand at 92%. The market analysis indicates approximately 94.8 percent likelihood that the BOJ will conduct a September quarter-point rate increase.

During the latter part of fiscal 2025 BOJ board member Naoki Tamura indicated that the central bank must increase interest rates to at least 1 percent or higher due to evolving price risks.

Real wage statistics revealed growth during two successive months in the market data reported the previous day.