The Dollar Index rose 0.3% on the day to 101.50, recovering a measure of earlier losses

The dollar firmed on Friday, but was headed for a loss in July after softer than expected inflation data released this week raised more doubts over the U.S. central bank’s plans to raise interest rates in the near-term.

The Dollar Index rose 0.3% on the day to 101.50, recovering a measure of earlier losses.

The yen weakened after the Bank of Japan held interest rates as expected, cutting short an overnight rally that was reportedly sparked by government intervention.

Broader currencies moved in a tight range, seeing limited support as anxiety over the Iran-U.S. war and its economic impact left traders cold towards risk-heavy propositions.

The pound and euro dropped 0.16% apiece in early trade, while the Australian dollar was flat.

The won was a notable decliner, with the USD/KRW pair soaring 1.1% as it reversed a sharp overnight decline that was reportedly caused by government intervention. The won touched its strongest level in five months Thursday night.

The yuan’s USD/CNY pair declined 0.1% after purchasing managers index data for July largely disappointed and showed both manufacturing and services activity in contraction.

The yen’s USD/JPY pair rose 0.7% to above 160 yen on Friday. The pair had slipped3% overnight to 158 yen, with a host of media reports attributing currency market intervention by Tokyo.

USDJPY rose back above 160 yen by Friday morning, even as the BOJ left rates steady and reiterated its commitment to hiking interest rates further this year.

The central bank said underlying inflation was likely to cross 2% in early-2027– a warning that markets viewed as a hawkish signal. Capital Economics analysts said they expect the BOJ to next move in October with a 25 basis point hike.