Investing.com - The dollar fell on Friday, to post its largest weekly loss against the yen in two months amid a selloff sparked by uncertainty over the future path of U.S. monetary policy.
USD/JPY was down 0.64% to 120.03 in late trade, to end the week with losses of 1.06%.
The sharp drop in the dollar came about amid doubts over how soon quickly U.S. interest rates will rise after the Federal Reserve downgraded its forecasts for growth and inflation and lowered its interest rate projections on Wednesday.
The Fed statement dampened expectations for a mid-year rate hike, prompting investors to exit positions which would benefit from a strong dollar.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, ended the week down 2.53%, posting the biggest weekly decline since October 2011.
Despite the past week’s reversal the dollar looks likely to continue to strengthen, with the Fed still expected to raise interest rates ahead of other central banks.
The Bank of Japan expanded it stimulus program in late October amid concerns that falling oil prices could lower the inflation outlook.
The euro has fallen around 10% against the dollar so far this year and the European Central Bank’s trillion-euro quantitative easing program, which launched earlier this month, is set to continue to act as a drag on the single currency.
In the week ahead, investors will be focusing on Tuesday’s U.S. inflation report after Fed Chair Janet Yellen warned last week that the stronger dollar was pushing down inflation. Wednesday’s data on durable goods orders will also be closely watched.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets. The guide skips Thursday as there are no relevant events on this day.
Monday, March 23
The U.S. is to release a report on existing home sales.
Tuesday, March 24
The U.S. is to release data on consumer price inflation and new home sales.
Wednesday, March 25
The U.S. is to publish data on durable goods orders.
Friday, March 27
Japan is to release a string of economic reports, including data on household spending, inflation, unemployment and retail sales.
The U.S. is to round up the week with final data on fourth quarter economic growth and the revised reading of the University of Michigan consumer sentiment index.