While the surge in the greenback to a five-month high against the yen provided another rally for Japan's Nikkei, traders in other Asian markets were more uneasy, with foreign investors removing cash from emerging markets seeking better United States returns.
Gold prices eased on Friday after touching their lowest in over five months the session before, dragged down by a stronger USA dollar and after Federal Reserve Chair Janet Yellen bolstered the case for raising interest rates next month.
The yen continued to weaken in the wake of the Bank of Japan's offer on Thursday to buy unlimited bonds.
According to Reuters, under BoJ's current monetary policy scheme outlined in September to adopt a strategy of JGB yield curve control, the BoJ has said it will guide the benchmark 10-year yield to around zero percent in an effort to stoke stubbornly low inflation and boost growth. Appreciating dollar also pulled down a host of global currencies including euro and Japanese yen. The Nasdaq composite added 0.7 percent to 5,333.97. It was up 3.7 percent for the week.
"The BOJ is taking steps to build up its credibility".
Finance Minister Taro Aso said that while nervous moves were seen in the forex market, the underlying moves were stabilising.
South Korean shares are likely to remain in a tight range next week as a looming rate hike by the Federal Reserve will continue to spur volatility, analysts said Saturday.
The dollar has been on a tear following Republican Donald Trump's November 8 victory over Democratic rival Hillary Clinton, tracking surging U.S. Treasury yields amid concerns government borrowing to fund possible stimulus programs could stoke inflation. Following the election of Donald Trump as the next USA president, investors will be looking for clues about the Fed's plans after next month.
"It has caused a wave of dollar buying across the board", said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago. "The Trump rally can continue, unless some cautious comments come out from the US side".
While Yellen did not explicitly say the Fed would take action at its December 13-14 policy meeting, she told a Congressional committee that a rate hike was likely "relatively soon".
Asked about her own future, Yellen said it was "fully my intention" to remain as Fed chair until her four-year term ends on February 3, 2018. Trump said during his election campaign that he would replace Yellen when her term expires.
Federal Reserve policymaker James Bullard said on Friday he is leaning towards supporting a rate rise next month, adding that a number of potential changes under Trump could affect future policy.
RBC now predicts a US interest rate increase in December, followed by two more 25 basis-point hikes in 2017.
"That dynamic is helping to lift the US dollar right across the board", she said.
The gap between 10-year government bonds in the USA and Germany widened to 200 basis points, its widest level since at least 1990, as investors expect the European Central Bank will keep monetary policy loose to stoke euro zone inflation. The euro rose to $1.0699 from $1.0681. That trend continued as discount retailer Ross Stores rose $2.89, or 4.4 percent, to $68.42 after it posted a better-than-expected profit and sales.
The dollar index, hit 101.48, its highest since early April 2003 before retreating to 101.27, up 0.4 percent on the day. Natural gas climbed 14 cents, or 5.2 percent, to $2.84 per 1,000 cubic feet.