The dollar index (DXY) rose by 0.07% on Friday, recovering from a one-week low as safe-haven demand increased amid heightened tensions in the Middle East following Iran’s threats to retaliate against recent U.S. attacks on its infrastructure. Higher Treasury note yields further bolstered the dollar’s appeal due to improved interest rate differentials.
In economic data, Italy’s May industrial production decreased by 0.3% month-over-month, worse than the expected decline of 0.2%, marking the largest drop in four months. The euro fell by 0.12% against the dollar in response, while markets currently estimate a 34% chance for a 25 basis point rate hike by the Federal Reserve at its upcoming meeting on July 28-29.
Meanwhile, Japan’s June producer prices rose 7.1% year-on-year, surpassing expectations of 6.8%, indicating potential strength in the yen, which fell 0.42% against the dollar. The market is anticipating further developments, with a mere 2% probability ascribed for a rate hike by the Bank of Japan at its meeting on July 31.
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