US dollar strengthens amid falling jobless claims, yen plunges as BOJ signals rate hike unlikely

The yen fell 0.37% to 147.205, after a 1.6% decline on Wednesday

The U.S. dollar strengthened on Thursday following a report that showed a sharper-than-expected drop in unemployment benefits, reducing concerns of an imminent recession. The dollar saw its biggest gains against the yen, which had dropped sharply earlier in the week amid uncertainty over Japanese monetary policy. The yen fell 0.37% to 147.205, after a 1.6% decline on Wednesday, due to comments from the Bank of Japan's Deputy Governor downplaying a near-term rate hike.

The dollar index reached a weekly high, rising to 103.21, while market participants remained cautious about further volatility. The yen, which started the week at a seven-month high, was influenced by the unwinding of carry trades following a surprise rate hike from the Bank of Japan.

Investors are now focused on the upcoming U.S. consumer price inflation report and comments from Fed Chair Jerome Powell. Other currencies, including the Swiss franc and euro, saw mixed movements, while cryptocurrencies like Bitcoin and Ether rebounded strongly.

The Swiss franc, which had previously gained from the unwinding of carry trades earlier in the week, declined by 0.47% to 0.866 per dollar, following a more than 1% drop on Wednesday.

The euro slipped by 0.05% to $1.0917, while the British pound rose by 0.48% to $1.275.

Investors are now turning their attention to the upcoming U.S. consumer price inflation report for July and remarks from Fed Chair Jerome Powell at the Jackson Hole Economic Policy Symposium on August 22-24.

"The market is likely to remain volatile," said Vasu Menon, managing director of investment strategy at OCBC.

The Australian dollar increased by 1.12% to $0.659, while the New Zealand dollar edged up by 0.25% to $0.601.

In the cryptocurrency market, Bitcoin surged 7.6% to $59,334.95, recovering after dropping below the $50,000 level on Monday. Ether was up 9.72% at $2,577.70.

(With inputs from Reuters)