Currency Dynamics Amid Global Trade Adjustments

The U.S. dollar weakened against the yen and sterling amid eased fears of a trade war fueled by U.S. tariffs. Investor focus is on possible rate hikes by the Bank of Japan and the Federal Reserve, while the Bank of England may lower rates. Market attention shifts to upcoming U.S. payroll data.

The value of the U.S. dollar plunged to an eight-week low against the yen, while hovering near a one-month low versus sterling on Thursday. This came as fears of a global trade war, which could accelerate inflation, started to wane among investors.

Japan's currency saw a boost from rising expectations of future interest rate hikes by the Bank of Japan. A central bank official has been advocating for continued rate hikes, following robust wage data. Sterling gained stability despite predictions that the Bank of England will reduce rates by a quarter point later in the day.

Dollar movement remains pivotal as anticipation builds for the release of U.S. payroll data on Friday. Stakeholders foresee a quarter-point cut fully priced for July, with 46.3 basis points of cuts anticipated by December. Meanwhile, the market has priced in a possibility of a quarter-point BOJ hike by September.

(With inputs from agencies.)