Dollar Surges Amid Easing Trade Fears and BOJ Policy Signals

The dollar is on track for its first monthly increase of 2025 as investor confidence grows in the resilience of the U.S. economy, with trade war fears fading. The Bank of Japan's recent policy meeting concluded with steady short-term interest rates, although inflation forecasts were upgraded.

Initially, the yen strengthened with expectations of a rate hike before stabilizing, as broader markets witnessed the dollar nearing two-month highs. This was influenced by Federal Reserve Chair Jerome Powell's comments on interest rate policies, while uncertainty eased around President Trump's tariffs after trade deals.

The euro remained a notable victim of the dollar's ascent as investors reassessed earlier bets on the European market. Meanwhile, the BOJ indicated possible rate hikes due to rising food costs impacting inflation, with the yen responding accordingly. Concurrently, trade agreements, such as Japan's deal with the U.S., have reduced some uncertainties for global markets.

(With inputs from agencies.)