HG MARKETS:

The U.S. dollar edged higher on Friday, supported by encouraging data from the U.S. labor market, while the Japanese yen strengthened following a relatively hawkish stance from the Bank of Japan during its recent policy meeting.

 Currently, the Dollar Index, which measures the greenback against a basket of six major currencies, was up 0.2% at 97.175. This marked a rebound after the index had fallen earlier in the week to its lowest level since February 2022. The dollar was buoyed by Thursday’s report showing a decline in new U.S. jobless claims, helping it recover from earlier losses.

Initial jobless claims fell by 33,000 to a seasonally adjusted 231,000 for the week ending September 13, reversing the previous week’s sharp increase to 264,000—its highest level since October 2021. This rare positive signal from the labor market has provided some justification for continued dollar strength, especially in the wake of the Federal Reserve’s recent rate cut on Wednesday—its first of the year—and its indication that two additional cuts may follow later this year.

Meanwhile, currency markets remain sensitive to political developments. On Thursday, the U.S. Supreme Court scheduled a hearing for November 5 to assess the legality of former President Donald Trump’s global tariffs. Trump has also renewed criticism of the Federal Reserve, accusing it of being too slow and cautious in cutting rates—raising fresh concerns over the Fed’s independence.

In a further development, the Trump administration formally requested that the Supreme Court allow the president to dismiss Federal Reserve Governor Lisa Cook, a move that would break historical precedent.

In Europe, GBP/USD dropped 0.5% to 1.3490 after data showed that the U.K.’s public borrowing had exceeded the official forecasts underpinning the government’s fiscal plans. A day earlier, the Bank of England had left interest rates unchanged and announced a slower pace for reducing its holdings of government bonds.

The euro also weakened slightly, with EUR/USD down 0.1% to 1.1773, trimming earlier gains amid growing political tensions in France. On Thursday, hundreds of thousands joined anti-austerity demonstrations across the country, urging newly appointed Prime Minister SebastienLecornu to abandon planned budget cuts.

Elsewhere, USD/JPY slipped 0.1% to 147.88, as the yen strengthened following the Bank of Japan’s decision to keep interest rates steady at 0.5%, in line with expectations. Notably, two of the nine members on the BoJ’s policy board advocated for a 25 basis point rate hike, signaling a more hawkish shift within the committee.

The central bank also announced plans to begin unwinding its large-scale holdings of exchange-traded funds (ETFs) and real estate investment trusts (REITs).