

A recovery in the U.S. Dollar Index ended a run of two weekly declines, with the index finishing around 102.00 against a weekly peak near 102.50. Friday saw EUR/USD ease from its intraday high of 1.1214 to around 1.1140.
A gradual pace of tightening would limit the risk of a sharp economic downturn, Dallas Federal Reserve President Lorie Logan argued on Friday, while calling for “at least two more quarter-point rate hikes”. In her view, skipping an increase “doesn’t change policy destination,”.
Separately, a gradual path also had the backing of St. Louis Fed President Alberto Musalem, even as he argued that rates needed to rise “again soon,”.
For Richmond Fed President Thomas Barkin, the issue was how quickly to adjust policy rather than which direction to take. In an interview with SiriusXM Business Briefing, he described that direction as “straightforward” and gradual steps as “a good way to go”. Reports from businesses also pointed to broader cost pressures, he said.
Broad-based selling in cryptocurrencies weighed on Bitcoin on Friday, taking it close to $77,000 and a six-week low. Binance’s disclosure of a $6.3 billion hack preceded the sell-off.
With only board member Takata favouring an increase to 1.5%, an 8–1 vote at the Bank of Japan retained the short-term policy rate at 1.25%. Governor Kazuo Ueda nevertheless indicated that policy would continue to be adjusted as required.
Despite accommodative financial conditions and low short-term real interest rates, underlying inflation had reached a level broadly aligned with the BoJ’s 2% target, the bank said. Its revised forecasts put fiscal 2027 core CPI inflation at 2.6%, up from 2.4%, while retaining the fiscal 2028 estimate of 2.0%. GDP growth projections were adjusted to 0.7% for both fiscal 2026 and fiscal 2027.
An inflation overshoot, rather than a shortfall against the target, had become the greater risk, policymakers indicated. Among the developments the bank said warranted close attention were foreign-exchange volatility, stronger AI-related demand and the Middle East conflict. As corporate demand for funding increased, lenders continued to show a willingness to extend credit.
Rather than waiting passively for inflation to increase, Ueda said the BoJ would take proactive action where necessary. Inflation still had to settle sustainably around 2%, he cautioned. There was no fixed schedule for policy changes: data, wages, financial conditions and the economic outlook would guide both their timing and pace.
Most major currencies lost ground against the yen after the announcement. A subsequent U.S. dollar rebound helped USD/JPY pare its earlier losses, but the pair was still marginally down as the weekend approached.
Modest increases in the U.S. dollar and Treasury yields, weakening risk appetite and Fed officials’ arguments for further rate rises weighed on gold on Friday. The metal reached $3,880, its lowest point of the year, breaching $3,900 for the first time since October last year.
A meeting-by-meeting approach remained central to Lagarde’s message as the European Central Bank left its key rates on hold in October. UOB economist Lee Sue Ann cited her remarks that, barring incoming information that materially changed the current assessment, “the direction of travel is quite clear.”
Against the assumptions used in the ECB’s September projections, average 10-year sovereign yields were up by around 35 basis points, according to Lagarde. She added that households and businesses faced higher borrowing costs, while equity prices had declined.