The US Dollar (USD) continued to strengthen against major currencies on Friday, with USD/JPY trading around 159.50, up 0.10% on the day, and USD/CAD reaching 1.3728, its highest level in more than a week [1][2]. The USD/JPY pair remains close to recent highs, supported by the wide interest rate differential between the US and Japan and persistent US Dollar strength [1]. Meanwhile, USD/CAD extended its advance for a third consecutive day, driven by weak Canadian employment data and firm USD demand amid ongoing US-Iran war tensions [2].
US macroeconomic data released recently showed a mixed picture. The Personal Consumption Expenditures (PCE) Price Index indicated a slight easing of inflation in January, while fourth-quarter GDP growth was revised down to 0.7% [1]. Durable Goods Orders were virtually unchanged at $321.2 billion in January, missing expectations for a 1.2% increase [1]. The Job Openings and Labor Turnover Survey (JOLTS) rose to 6.946 million in January, above both the revised previous reading of 6.55 million and market expectations [1]. Consumer confidence weakened, with the University of Michigan Consumer Sentiment Index slipping to 55.5 in March from 56.6 previously [1].
In Canada, employment data showed a sharp deterioration, with Net Change in Employment falling by 83.9K in February, far below expectations for a 10K increase and following a 24.8K decline in January [2]. The Unemployment Rate rose to 6.7% from 6.5% in January, exceeding the 6.6% market forecast [2]. This points to growing slack in the Canadian labor market and could prompt the Bank of Canada (BoC) to reassess its monetary policy outlook, although markets expect the BoC to keep rates on hold through 2026 [2]. The BoC is scheduled to meet next week and is widely expected to leave interest rates unchanged [2].
Geopolitical tensions, particularly the ongoing US-Iran war, and rising energy prices have contributed to cautious market sentiment, further underpinning demand for the Greenback [1][2]. The US Dollar Index (DXY) trades around 100.30, its highest level since November 2025, as investors reduce expectations for Federal Reserve (Fed) rate cuts amid renewed inflation risks [2]. Previously, markets expected more than 50 basis points of Fed easing this year, but now only around 20 basis points of cuts are priced in by December, according to Bloomberg interest-rate swaps data [2].
Japanese policymakers remain vigilant as the Yen continues to weaken, with Finance Minister Satsuki Katayama stating that authorities are ready to take all necessary measures to address excessive volatility in the foreign exchange market [1]. The Bank of Japan (BoJ) is expected to maintain a cautious approach to policy normalization, assessing whether wage growth and domestic demand can sustain a durable inflation trend [1]. In Canada, elevated oil prices may offer some support to the CAD, but also add to inflationary pressures, reinforcing the BoC’s cautious stance [2].
CONCLUSION
The US Dollar's strength is driving significant gains against both the Japanese Yen and Canadian Dollar, supported by mixed US economic data, weak Canadian employment figures, and heightened geopolitical tensions. Policymakers in Japan and Canada are expected to maintain cautious monetary stances, with intervention risks and inflation concerns influencing market dynamics. Overall, the market impact is high as investors adjust expectations for central bank actions and remain focused on global uncertainties.