By Rae Wee

SINGAPORE (Reuters) –

The yen experienced fluctuations after the Bank of Japan (BOJ) raised rates on Friday, while the Australian and New Zealand dollars surged in response to U.S. President Donald Trump’s comments about tariffs on China.

The BOJ increased interest rates by 25 basis points at the end of its two-day policy meeting, a move that had been clearly communicated by policymakers in advance.

The yen fluctuated between losses and gains in volatile trading shortly after the announcement, ultimately ending little changed at 156 yen per dollar.

Attention now shifts to BOJ Governor Kazuo Ueda’s post-meeting briefing later today for insights on the pace and timing of future rate hikes.

The euro recently increased by 0.08%, reaching 162.71 yen, slightly reducing earlier session gains, while sterling rose by 0.17% to 192.99 yen.

Earlier on Friday, data revealed that Japan’s core consumer prices climbed 3.0% in December compared to the previous year, marking the highest annual pace in 16 months.

In other developments, the Australian and New Zealand dollars gained sharply following Trump’s Thursday interview with Fox News, in which he expressed a preference for negotiating a trade deal with China rather than resorting to tariffs.

The Aussie jumped over 0.5%, reaching a five-week high of $0.6321, while the kiwi also peaked at $0.5708.

Both Antipodean currencies serve as liquid alternatives to the Chinese yuan.

Sim Moh Siong, a currency strategist at Bank of Singapore, remarked, “It’s still early days, although it looks like he prefers to negotiate with China first and perhaps come to a deal, rather than to use tariffs.”

He added, “If he opts for a deal over tariffs, Asian currencies, along with the Aussie and kiwi, could see further relief.”

The Chinese yuan also benefitted from Trump’s statements, with the onshore unit climbing to its strongest level in over a month at 7.2450 per dollar. Its offshore counterpart also hit a high of 7.2519 per dollar.

DOLLAR BLIP

In the broader market, the dollar weakened significantly following Trump’s recent comments on China tariffs, on track for its worst weekly drop in two months.

Investors are selling the dollar after Trump’s anticipated tariff announcements did not materialize immediately following his inauguration.

The greenback extended its earlier losses, declining 0.23% to 107.89 against a basket of currencies, preparing for a 1.4% weekly loss.

Sim noted, “The current dollar pullback reflects that some tariff risk premium has been priced into the dollar, which the market is now re-evaluating.”

Meanwhile, the euro climbed 0.24% to $1.0441 and is likely to achieve a 1.7% weekly gain, its strongest since November 2023. Sterling advanced 0.32% to $1.2391, set for a weekly rise of 1.8%, ending three consecutive weeks of losses.

Compounding the dollar’s challenges were Trump’s comments urging the Federal Reserve to lower interest rates, asserting his understanding of monetary policy surpasses those responsible for it.

Rodrigo Catril, senior FX strategist at National Australia Bank, stated, “Trump’s comments indicate we will continue experiencing volatility driven by impulsive remarks, potentially undermining Fed independence.”

His statements come just days before the Federal Reserve’s first policy meeting under his administration, where rates are broadly expected to remain unchanged.

In the cryptocurrency sector, bitcoin increased by 0.51% to $103,648.55, while ether rose by 1.75% to $3,305.51.

Trump also initiated plans for a cryptocurrency working group focused on proposing regulations for digital assets and exploring the establishment of a national cryptocurrency stockpile, fulfilling his commitment to reform U.S. crypto policy quickly.