Dollar strength has been another factor behind the yen's slide. Benign U.S. inflation data for June briefly supported hopes that price pressures would cool soon, but the escalating Middle East conflict has revived concerns about energy-driven price pressures.
Oil prices topped $100 a barrel this week for the first time in nearly two months. Federal Reserve Chair Kevin Warsh has repeatedly insisted that the central bank is committed to bringing inflation down to its 2% target.
"The June inflation print was very positive. But we're still talking about just one month here," said Macrae Sykes, portfolio manager at Gabelli.
"Warsh is very focused on inflation. He's bringing a serious attitude to this."
The euro EUR=EBS rose 0.1% to trade at $1.1388, a day after the European Central Bank left interest rates unchanged but kept the possibility of a September hike alive.
"Markets are still seeing the risk of second-round effects growing as oil prices remain elevated, and until we have better data on underlying price pressures, uncertainty will linger," wrote Michiel Tukker, senior UK and euro zone rates strategist at ING.
Traders are pricing in a 29.9% chance of a rate hike in September, according to data compiled by LSEG.
Sterling GBP= was up 0.15% to $1.3335, bouncing off a three-week low. The U.S. dollar index =USD, which measures the currency against a basket of six others, was last 0.09% lower at 101.35.
The Swiss franc CHF= was largely unchanged against the dollar, at 0.8163. The Swiss National Bank said on Friday it does not engage in manipulation of the currency, after the U.S. Treasury Department kept Switzerland on a list for enhanced monitoring of foreign exchange practices.
The dollar has gained more than 3% against the franc in 2026, but the Swiss currency is far from the weakest performer. The yen has weakened by nearly 5%, in line with losses in the Norwegian NOK= and Swedish crowns SEK=.
The 30-year Treasury yield US30YT=RR held well above 5%, while 2-year yields US2YT=RR were hovering at 4.3413%, their highest since February 2025.
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