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Elsewhere, the dollar gained 0.58% against the yen to 142.64, recovering from a seven-month low, after U.S.-Japan trade talks skirted discussion of foreign exchange policy. That helped unwind long-yen positions, the most extended since 1986, and allowed the dollar to recoup broader losses driven by recent market turbulence.
While the dollar has been under pressure due to tariff-related uncertainty, Thursday’s developments provided a floor. Safe-haven flows into the Swiss franc and euro appear stretched, and the euro’s trade-weighted strength—up 9%—may soon become a headwind for euro zone exporters.
Market Forecast: Dollar Index Positioned for Stabilization
The ECB’s move, coupled with subdued forward guidance and trade-related caution, tilts the scales back in the dollar’s favor in the near term. With the Fed on hold and euro zone easing risks still alive, interest rate differentials are expected to anchor support for the DXY. As euro strength fades and safe-haven demand for non-dollar currencies moderates, the dollar is likely to consolidate gains and could trend higher if risk sentiment continues to stabilize.
More Information in our Economic Calendar.
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