Dollar Gains Momentum Ahead of CPI

The U.S. dollar edged higher on Thursday as investors prepared for the delayed release of the U.S. CPI, now scheduled for Friday. The CPI data, postponed due to the U.S. government shutdown, is critical for evaluating consumer price inflation and informing policy decisions, particularly for the Social Security Administration’s annual cost-of-living adjustment for 2026.

The U.S. dollar index, which measures the greenback against six major currencies, rose 0.05% to 98.979. Against the Japanese yen, the dollar climbed 0.17% to 152.21 yen, briefly touching 152.26 yen, the highest since mid-October. The euro slipped slightly to $1.1604, remaining largely range-bound. Traders are closely monitoring these movements ahead of the CPI release, as the data could influence both Federal Reserve policy expectations and market sentiment.

Yen Declines on Stimulus Expectations

The Japanese yen weakened to a one-week low against the dollar, as markets anticipate details of a substantial stimulus package from new Prime Minister Sanae Takaichi. Investors expect increased government spending and monetary easing to bolster Japan’s economy, a move likely to put further downward pressure on the yen.

The yen’s weakness is compounded by the divergence in monetary policy between Japan and other major economies. While the Federal Reserve has shifted focus from inflation to the labor market, Japan continues its accommodative approach, contributing to the currency’s depreciation. Analysts note that the yen’s performance reflects both policy expectations and broader global investor sentiment, as traders adjust positions in anticipation of fiscal and monetary developments.

Trade Tensions Add Uncertainty

Ongoing trade tensions between the U.S. and China continue to affect currency markets. Potential curbs on a wide range of software-powered exports, including laptops and jet engines, have increased investor caution. While some analysts view the rhetoric as negotiation tactics rather than immediate policy changes, the uncertainty reinforces demand for safe-haven assets, including the U.S. dollar.

The dollar’s modest gains reflect its status as a global safe-haven currency, while its strength is tempered by expectations of a possible Federal Reserve rate cut later in the year. Investors remain attentive to both economic data and geopolitical developments, as these factors will shape currency trends in the coming months.

In summary, the U.S. dollar’s advance, the yen’s decline amid stimulus expectations, and trade-related uncertainties are key drivers of currency market dynamics this week. Traders and investors are closely watching developments as the CPI release and policy announcements are expected to guide market sentiment and influence exchange rates.