Dollar Retreats from Two-Week High as Yen Heads for Weekly Loss

The U.S. dollar pulled back from a two-week high on Friday, surrendering part of its recent gains as risk-sensitive assets rebounded from a sharp selloff driven by concerns over rising artificial intelligence-related spending this year.

Despite the retreat, the dollar remained on track for weekly gains, trimming earlier losses against the Japanese yen after U.S. data showed an improvement in consumer confidence this month, even as concerns over labor market conditions and elevated living costs persisted.

The Japanese yen was little changed at 156.98 per dollar ahead of Sunday’s general election, where Prime Minister Sanae Takaichi is widely expected to secure victory.

However, the currency remains on course for its worst weekly performance against the dollar since October, having surrendered most of the substantial gains recorded in January as traders positioned for political uncertainty and shifting rate expectations.

Otto Shinohara, investment strategist at Mizuho Currency Management in Chicago, said the dollar had largely moved inversely to risk assets this week.

“The dollar has largely traded opposite to risk assets, including equities, bitcoin, and precious metals such as gold and silver,” Shinohara noted. “Today’s reversal in the dollar coincided with a shift in sentiment across those assets.”

The dollar index, which measures the greenback against a basket of major currencies, slipped 0.3% after earlier touching its highest level in two weeks. Nevertheless, it remained up 0.52% on the week, on track for its strongest weekly gain since early January.

The euro rose 0.32% to $1.1813 after the European Central Bank left interest rates unchanged on Thursday, as expected, while downplaying the influence of currency fluctuations on future policy decisions.

Sterling recovered part of Thursday’s nearly 1% decline, climbing 0.61% to $1.3608. Even so, the British pound remains headed for its steepest weekly drop against the dollar since late October.

In cryptocurrency markets, bitcoin surged 8.7% to $68,613.05 after hitting its lowest level since December 2024 at $60,017 earlier in the week.

Despite the rebound, the world’s largest cryptocurrency is still projected to post a weekly loss of roughly 9%, underscoring ongoing volatility in digital asset markets.