The U.S. dollar is poised for its biggest weekly decline in a year as President Donald Trump's Greenland deal and shifting geopolitical landscape have weighed heavily on investor sentiment. The currency has faced significant pressure following Trump's announcement of securing U.S. access to Greenland through a NATO agreement, which came alongside his decision to back away from European tariff threats.
Dollar Index Records Sharp Weekly Decline
The dollar index, measuring the U.S. currency against six major units, traded at 98.329 after dropping 0.58% in the previous session. The currency is on course for a 1% weekly slide, marking its worst performance since January 2025.
| Currency Pair: |
Current Level |
Weekly Performance |
| Dollar Index: |
98.329 |
-1% (worst since Jan 2025) |
| EUR/USD: |
$1.1751 |
Near 3-week high |
| GBP/USD: |
$1.3496 |
Near 2-week high |
Thierry Wizman, global FX & rates strategist at Macquarie Group, noted that while the Greenland deal addresses immediate tariff and invasion concerns, it doesn't resolve the core issue of seeming alienation among allies. "And that's not a good place to be if you want to preserve the USD's reserve-currency status," Wizman stated.
Bank of Japan Decision in Focus
Investor attention on Friday centers on the Bank of Japan's policy decision, where the central bank is broadly expected to maintain rates steady after raising its policy interest rate to a 30-year high last month. Market participants will closely watch Governor Kazuo Ueda's comments for signals about the timing of the next rate hike and any hawkish policy shifts to support the struggling yen.
| Japanese Economic Indicators: |
Details |
| Yen Level: |
158.50 per USD |
| Weekly Performance: |
Fourth straight decline |
| Intervention Risk: |
Above 160 level |
| Core Inflation: |
Above 2% target (December) |
Yen Under Mounting Pressure
The yen has faced relentless selling pressure since Sanae Takaichi became Japan's prime minister in October, declining over 4% on fiscal concerns. The currency wobbled at 158.50 per U.S. dollar in early Asian trading and is heading for its fourth consecutive weekly drop, a streak last seen in September. Traders remain wary that a break beyond the 160 level could prompt Tokyo to intervene in currency markets.
Magdalene Teo, head of fixed income research for Asia at Julius Baer, explained that the yen continues to be sold as investors fear the BOJ's monetary policy remains too accommodative while inflation risks rise. "For sustainable JPY appreciation, this would require significant investment domestically and a strong belief that Takaichi's administrative policies will eventually translate into growth and fiscal health," Teo noted.
Bond Market Volatility Reflects Fiscal Concerns
Japan's bond market experienced significant turbulence this week, highlighting investor anxiety about the country's fiscal position. Prime Minister Takaichi's call for a snap election and promises of tax cuts sent Japanese government bond yields to record highs, underscoring market concerns about fiscal sustainability.
Carol Lye, portfolio manager at Brandywine Global, emphasized the need for concrete action from authorities. "If there's no action, then it's just words. It's not going to anchor the market down," Lye stated, adding that rate hikes are not coming quickly enough to stabilize conditions.
Other Currency Movements
In broader currency markets, the Australian dollar remained steady at $0.6841, while the New Zealand dollar weakened 0.25% to $0.5914. Bitcoin advanced 0.37% to $89,518.13, moving away from the week's earlier lows as cryptocurrency markets showed modest recovery.
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