BOJ holds rates steady, yen logs worst month since July
The Japanese yen remained under pressure on Friday, heading for its steepest monthly loss since July, after the Bank of Japan (BOJ) opted to maintain interest rates and struck a less hawkish tone than expected. BOJ Governor Kazuo Ueda’s decision to keep the policy rate at 0.5% disappointed traders anticipating more aggressive signals on future hikes.
Despite Tokyo’s core inflation remaining above the 2% target and Finance Minister Satsuki Katayama’s statement that the government is closely monitoring currency movements, the yen has failed to gain momentum. It was flat on the day and down 4.2% against the dollar in October.
Some strategists, including Noel Dixon of State Street Global Markets, remain optimistic about the yen long term, citing rising wages and fiscal expansion under new Prime Minister Sanae Takaichi. “Ultimately, the BOJ will need to normalize policy, at least to 1%,” Dixon said.
Fed divides on next steps, dollar rises
The U.S. dollar index rose 0.35% to 99.82 on Friday, marking a 2% monthly gain. Support came from stronger-than-expected economic resilience and investor caution about the Federal Reserve’s future actions. Though the Fed cut rates this week as expected, internal disagreement suggests uncertainty ahead.
Fed Chair Jerome Powell emphasized optionality, while several regional Fed presidents — including Lorie Logan and Beth Hammack — voiced concern that cutting rates too soon could undermine the central bank’s inflation targets. CME Group data shows traders have dialed back their expectations for a December cut, with odds dropping from 93% last week to 63%.
Dixon suggested the dollar may consolidate under technical resistance near 102, before strengthening in 2026 amid improved U.S. growth prospects.
Euro and pound drop amid central bank caution
The euro fell 0.37% to $1.1522 after the European Central Bank left rates unchanged at 2% for the third straight meeting. The ECB maintained that policy is in a “good place,” signaling no urgency for further tightening as economic headwinds ease. The euro has declined 1.8% this month.
Meanwhile, the British pound fell 0.14% to $1.3132, reaching its lowest level since April. Sterling has lost 2.3% in October amid political concerns over Finance Minister Rachel Reeves and uncertainty about the upcoming budget. Traders are increasingly pricing in the possibility of a Bank of England rate cut, though most still expect the central bank to hold rates steady next week.
“While we think GBP sentiment has turned overly bearish, we have long argued against fading the move ahead of the Budget,” Bank of America analysts noted, warning of downside risks.
