The dollar dropped against the yen on Friday, while gold soared to a record high as investors increased bets on a possible 50-basis point interest rate cut from the Federal Reserve next week. Media reports from the Financial Times and Wall Street Journal described the decision as a “close call,” reigniting speculation for a larger rate cut.

Asian shares also gained, with LSEG data showing the odds of a 50bp cut rising to 41% from 28%. Analysts noted renewed uncertainty, with markets now split between expectations for a 25bp or 50bp cut.

The yen strengthened further this week, bolstered by hawkish remarks from Bank of Japan officials. Policy board member Naoki Tamura expressed concern on Thursday, stating he was “worried that upside inflation risk was heightening.” This added to the yen’s momentum as markets continue to weigh the possibility of a larger-than-expected interest rate cut from the Federal Reserve. The combined impact of BOJ’s inflation concerns and uncertainty around the Fed’s decision has added volatility to currency markets heading into next week’s key announcements.