The dollar eased against a range of currencies on Thursday, as investors digested US President Donald Trump's latest tariff plans, while the yen rose to multi-week highs as bets mounted for further rate hikes by the Bank of Japan (BOJ).
The dollar index was last 0.4% lower at 106.79. It is set to end the week virtually flat, following last week's 1.2% decline.
The yen, meanwhile, rose to a more than two-month high against the dollar, which was down 1.4% to 150.020 having briefly dropped earlier below the 150-mark, driven mostly by worries about Trump's tariffs as well as rising expectations for more BOJ hikes this year.
Versus the euro, the yen rose 0.74% and was earlier on track for its biggest daily drop since January 27.
BOJ Governor Kazuo Ueda said on Thursday he had met Prime Minister Shigeru Ishiba for a regular exchange of views on the economy and financial markets, according to Reuters.
Bank of Singapore currency strategist Moh Siong Sim said he did not think there was just one reason for the yen's surge, but that news Ueda and Ishiba had not discussed rises in long-term interest rates could have reassured markets.
"Perhaps that got people excited to think that the recent rise in the yields that supported the yen wasn't a concern, and therefore it's a green light for more yen strength and perhaps a BOJ hike quite soon," he said.
Trump said on Wednesday he would announce fresh tariffs over the next month or sooner, adding lumber and forest products to previously announced plans.
Michael Pfister, a currency analyst at Commerzbank, said Thursday's decline in the dollar was less marked than moves after Trump initially announced his tariff plans for Mexico and Canada in January.
"We are seeing a bit of dollar weakness, but it's not comparable," he said.
Markets are monitoring geopolitical developments after Trump on Wednesday called Ukrainian President Volodymyr Zelenskiy "a dictator", deepening a feud between the two leaders that has alarmed European officials.
Comments by Trump that "it's possible" for the US and China to have a new trade deal were also being evaluated by market players. Trump also said on Wednesday he expected Chinese President Xi Jinping to visit the US, without saying when.
"Where we are seeing an impact is with the Australian and New Zealand dollar, which have a lot of exposure to Chinese trade," Pfister said.
The Aussie dollar last traded 0.51% higher at $0.63780, also reacting to a mixed jobs report that showed employment outpaced forecasts for a second successive month in January, yet the unemployment rate still ticked higher.
The New Zealand dollar was up 0.57% at $0.57340.
The euro last stood at 156.750 against the yen and was down 0.3% against the dollar at $1.041.
Sterling was up 0.25% at $1.26180.
