US FX WRAP: Dollar chops with Yen sold post BoJ but off worst levels following rate check

The Dollar Index was ultimately little changed on Friday but saw two-way price action. DXY ground higher through the European session to hit a high of 100.55, remaining supported near post-FOMC highs as elevated energy prices and a lack of geopolitical diplomacy and ongoing supply constraints initially boosted crude prices and thus inflation expectations. The highs in the buck were seen as crude hit session highs after reports Saudi Arabia had also cancelled European crude deliveries for next month. However, the gains in crude ultimately pared, bringing the Dollar back down with them.

The Yen was the clear G10 laggard after the BoJ delivered an expected 25bps hike in a 7-2 vote. The two surprise dissenters and lack of guidance towards a faster tightening pace prompted immediate JPY pressure; Asada cited insufficient economic strength, while Sato argued price developments had not substantially accelerated. Ueda's presser added to the dovish tone, highlighting that easy monetary conditions were expected to be maintained, with bank lending and asset markets remaining accommodative. USD/JPY extended to a 158.05 high from a 155.88 low at the extremes. However, the Yen saw a notable bout of strength during the afternoon, initially with no clear catalyst. Nikkei later reported that the move followed a rate check conducted by Japanese authorities, which helped USD/JPY fall from around 157.80 to 156.60.

The Euro was also ultimately unchanged against the Greenback, with price action largely tracking swings in the Dollar. Meanwhile, ECB's Kaasik and Kazaks struck a hawkish tone, with Kazaks suggesting September's hike was unlikely to be the last unless the baseline changed materially. President Lagarde, however, reiterated that second-round effects were not evident. A Bloomberg survey suggested economists expect the ECB to wait until December before delivering a final rate increase.

The Pound saw gains heading into the end of the week as the Dollar pared its earlier move higher. Meanwhile, some profit-taking may also have supported Sterling following the sharp BoE-induced weakness seen on Thursday.

The Antipodeans were mixed, with Aussie retaining modest gains, while swings in AUD/USD largely tracked the ups and downs in the Dollar. Kiwi underperformed, however, as AUD/NZD extended its gains above 1.2400. Participants will be watching the Trump/Xi summit next week for any major developments, given the Antipodeans' exposure to China.