Most Asian currencies edged higher on Friday as the U.S. dollar headed for its worst week since June. The Japanese yen softened after the Bank of Japan held its benchmark rate at 0.75%, though it slightly upgraded its inflation and growth forecasts for fiscal 2025-2026. Gains were tempered by geopolitical tensions.

The yen’s weakness persisted despite the BOJ’s optimistic outlook, weighed down by concerns over Japan’s fiscal burden. A sharp sell-off in Japanese government bonds this week reflected market unease about fiscal stress under Prime Minister Sanae Takaichi, who called a snap election. Meanwhile, the Chinese yuan held near its strongest level since mid-2023 after the PBOC set its daily midpoint below 7.

Investors now await BOJ Governor Kazuo Ueda’s post-meeting address for further guidance on policy. The dollar’s weekly decline comes amid uncertainty over U.S. deals and President Trump’s warnings, which have dampened broader risk appetite across the region. Traders remain cautious on the Indian rupee amid unclear trade talks.