The dollar was stable and ready to end a two-week losing streak on Friday as U.S. labor and manufacturing data left traders speculating on when and by how much the Federal Reserve might cut rates this year.

The yen fluctuated at 157.24 per dollar after hitting a six-week high of 155.375 on Thursday following suspected interventions by Tokyo last week that could amount to nearly 6 trillion yen, according to data from the Bank of Japan.

 

Data on Friday showed core consumer prices in Japan accelerated for a second consecutive month in June, sustaining market expectations that the central bank might soon increase interest rates.

The BOJ exited negative rates and bond yield control in March, moving away from a decade-long radical stimulus program, with markets warming to the possibility of a rate hike at its meeting at the end of the month. Traders are pricing in a 41% chance of a 10 basis point hike.

 

The yen has fallen over 10% against the dollar this year, hampered by the substantial interest rate differential between the U.S. and Japan, and hovered around 38-year lows at the beginning of the month, prompting suspected interventions by Tokyo.

In the U.S., the number of Americans filing new claims for unemployment benefits rose more than expected last week, though the labor market showed no substantial change.

The dollar index, which evaluates the U.S. currency against six counterparts, was at 104.21, up from a four-month low of 103.64 reached on Wednesday. The index is poised for a 0.16% weekly gain after shedding value for two consecutive weeks.

 

The Federal Reserve is set to convene at the end of July, with markets predicting a very low likelihood of a rate cut by the central bank. However, traders are fully anticipating a 25 basis point reduction for the Fed's September meeting.

Ryan Brandham, head of global capital markets for North America at Validus Risk Management, mentioned the U.S. economy is nearing a point where a rate cut may be justified.

"But caution from the Fed and a slow approach are possibly needed to avoid reigniting the inflation they have strived to control," he stated.

 

Federal Reserve Bank of San Francisco President Mary Daly said on Thursday that she is seeking more assurance that inflation is moving back to the Fed's 2% target before advocating for an interest rate cut.

"We don't have price stability at present," Daly remarked at a Dallas Fed event.

The euro was relatively unchanged at $1.0893 during early Asian hours following a 0.4% drop in the previous session as the European Central Bank maintained steady rates and provided no clear guidance on its next move.

 

The single currency had reached a four-month high of $1.0947 on Wednesday, recovering all recent losses that were due to uncertainty surrounding the French election.

With money markets expecting more than two rate cuts from the Fed by year-end and just under two for the ECB, the euro could maintain a dominant position for the rest of the year.

Sterling remained flat at 1.2942 after a 0.5% decline in the previous session, as data indicated that wages in Britain grew at a slower rate, but were still strong enough to sustain doubts about a rate cut from the Bank of England.

The pound hit a one-year high on Wednesday and has risen 1.7% so far this year.

In other currencies, the Australian dollar eased by 0.11% to $0.66985, while the New Zealand dollar was 0.22% lower at $0.6032.