USD Strengthens on Fed-BoJ Policy Divergence, Yen Weakness Persists

The US dollar continues its upward trajectory, with the Dollar Index climbing 0.4% to 106.70, as widening interest rate differentials between the Federal Reserve and Bank of Japan drive global FX flows. USD/JPY has surged 0.6% to 154.85, marking a three-month high as the BoJ maintains its ultra-loose monetary policy while the Fed signals prolonged higher rates. EUR/USD retreated 0.3% to 1.0580, pressured by dollar strength and concerns over European economic weakness. Gold prices fell $15 to $2,608 per ounce, reflecting reduced safe-haven demand amid dollar appreciation. The Fed's hawkish stance, supported by resilient US economic data, contrasts sharply with the BoJ's commitment to accommodation despite rising Japanese inflation. Technical indicators suggest USD/JPY could test the 155.00 psychological barrier, while EUR/USD faces immediate support at 1.0560. Traders are positioning for continued dollar strength as policy divergence remains the dominant market theme.