Fed Officials Warn of Rising Inflation as Yen Strengthens
The US dollar started the North American session higher on Friday but ultimately finished mixed. The dominant story, however, remained the Japanese yen. Reports suggested that authorities were preparing to support the currency after official rate checks and growing expectations of intervention. Banks had been instructed to stand ready to exchange yen for euros, reinforcing the belief that policymakers remain uncomfortable with the yen's recent weakness.
The Bank of Japan left its policy rate unchanged at 1.00%, as widely expected, but board member Takata dissented in favor of a 25-basis-point rate increase. While the policy decision itself had little lasting impact, traders focused on the BOJ's modestly more optimistic economic outlook and ongoing inflation risks.
US stock indices closed higher on the day, with the Dow Jones Industrial Average rising 278.05 points (+0.53%) to 52,491.26. The S&P 500 gained 52.17 points (+0.70%) to 7,489.81, while the Nasdaq Composite rose 251.68 points (+1.00%) to 25,373.85.
In central bank news, three Fed dissenters, Neel Kashkari, Beth Hammack, and Lorie Logan, delivered a consistent message explaining why they favored a 25 basis point rate hike at this week's FOMC meeting. Each argued that inflation remains too high and is not on a credible path back to the Fed's 2% target without additional policy tightening.