Dollar Rises Despite Weak U.S. Data Amid Trade War Thaw

The dollar rose despite weak U.S. data as optimism around easing trade tensions grew. The yen fell after Japan's central bank cut growth forecasts. President Trump hinted at potential trade deals, bolstering the dollar's rebound. U.S. unemployment claims and manufacturing data remain closely watched.

The dollar shrugged off disappointing U.S. data to climb on Thursday, driven by investor focus on potential cooling in the trade war. Conversely, the yen dropped after Japan's central bank downgraded growth and inflation forecasts, holding interest rates steady. This move was expected, yet it diminished hopes for future hikes.

Bart Wakabayashi, branch manager at State Street in Tokyo, described the unanimous decision to hold rates as a 'holding pattern,' attributing it to uncertainties in U.S. policies. The Bank of Japan forecasted GDP growth at 0.5% for the 2025-26 fiscal year, down from 1.1%.

The dollar, previously hit by trade war uncertainties and tariff alterations from President Trump, has begun to bounce back as possibilities of deals, including with China, linger. With upcoming U.S. jobless claims and manufacturing surveys, markets are poised for economic indicators to assess recession risks.

(With inputs from agencies.)