The Japanese yen weakened toward 158.5 per dollar on Friday, heading for a weekly decline of over 1% as intensifying US inflation pressures bolstered expectations of another Federal Reserve rate hike later this year. A surge in energy and trade costs linked to the Iran war continued to underpin the US dollar, with the dollar index climbing near 99 and poised for a solid weekly gain. Investor sentiment also remained cautious as markets monitored high-stakes discussions between President Donald Trump and Chinese President Xi Jinping, after Xi warned that Taiwan could emerge as a major flashpoint between the world's two largest economies. Adding to the hawkish undertone, Bank of Japan board member Kazuyuki Masu signaled support for an early rate hike, warning that inflationary risks tied to geopolitical instability are becoming increasingly entrenched.
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