The yen gained 0.3% to trade at 155.87 per dollar, clawing back losses after slipping to a two-week low. The rebound follows a volatile start to the week triggered by political developments in Tokyo.
On Wednesday, the Japanese government appointed two academics regarded as strong advocates of economic stimulus to the board of the Bank of Japan (BOJ). Adding to speculation about a dovish tilt, the Mainichi newspaper reported that Prime Minister Sanae Takaichi had expressed reservations about further rate hikes during a recent meeting with BOJ Governor Kazuo Ueda.
In a note to clients, analysts at Bank of America said the recent news flow “reinforced the perception that the Takaichi administration favors a dovish stance on monetary policy.” However, they cautioned that allowing unchecked yen depreciation carries political risks and that foreign exchange intervention alone would not suffice, suggesting policy inaction remains unlikely.
Governor Ueda, speaking to the Yomiuri newspaper, said the central bank would scrutinize incoming data at its March and April meetings before deciding on any rate adjustments, leaving open the possibility of a near-term hike. Meanwhile, hawkish board member Hajime Takata warned of inflation overshoot risks and called for a gradual rise in interest rates.
Analysts at Capital Economics noted that further attempts by the Takaichi administration to influence BOJ policy could unsettle Japan’s bond and currency markets. Still, they argued that underlying fundamentals point toward stabilization in the Japanese government bond market and a rebound in the yen.
Dollar Steady as Tariff Uncertainty Persists
The U.S. dollar index, which tracks the greenback against a basket of six major currencies, held steady at 97.585. Markets remain uncertain about how President Trump will respond after the Supreme Court struck down his emergency tariffs on February 20.
On Wednesday, U.S. Trade Representative Jamieson Greer said tariff rates for some countries would rise to 15% or higher from the recently imposed 10%, though he did not specify affected trading partners or detail how the measures would align with existing trade agreements.
Analysts at Westpac observed that President Trump’s 2026 State of the Union address focused heavily on economic themes but offered little clarity on forthcoming policy initiatives, including tariff implementation.
Nvidia Earnings Drive Risk Rally
Investor sentiment received a lift after Nvidia, a bellwether for the artificial intelligence sector, forecast first-quarter revenue above market expectations. The upbeat outlook extended Wall Street’s technology-led rally to two-week highs.
However, Nvidia shares pared some gains in after-hours trading, and U.S. equity futures edged lower, signaling cautious follow-through in global markets.
The yield on the U.S. 10-year Treasury note ticked up 0.2 basis points to 4.0442%, reflecting modest upward pressure in bond markets.
Fed Seen on Hold
Markets remain overwhelmingly confident that the Federal Reserve will keep interest rates unchanged at its next policy meeting. According to the CME Group’s FedWatch tool, fed funds futures imply a 98% probability that rates will remain on hold at the conclusion of the March 18 meeting — virtually unchanged from the previous day.
Broader Currency Moves
In offshore trade, the U.S. dollar slipped 0.3% against the Chinese yuan to 6.8324, marking the strongest level for the Chinese currency in nearly three years. The move came despite signals from Beijing that authorities are wary of rapid appreciation, with seasonal settlement demand providing support.
The euro edged up 0.1% to $1.1817, while sterling was little changed at $1.3555.
The Australian dollar held steady at $0.7126. The New Zealand dollar briefly dipped below the $0.60 threshold before recovering to trade flat at $0.6003.
In cryptocurrency markets, Bitcoin fell 0.7% to $68,478.38, while ether declined 2.0% to $2,059.01, reflecting some profit-taking after recent gains.
With central bank signals, trade policy uncertainty and corporate earnings all in play, markets are navigating a complex mix of monetary caution and risk-driven optimism — leaving currencies and equities sensitive to even subtle shifts in policy tone.