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As investors worry about the possibility of a recession, the dollar rises against the yen and the Australian dollar falls.

Tokyo (Reuters) – Fears of a global recession pushed the Japanese yen and the U.S. dollar higher on Friday, while the risk-sensitive Australian dollar fell to its lowest level in two years.

The yen went up to 135.105 per dollar, which is better than its low of 137.00 per dollar in the middle of the week, which was its weakest point in 24 years.

The dollar index, which compares the US currency to six others such as the yen, euro, and pound, rose 0.18 percent to 104.85.

The euro dropped 0.31 percent to $1.0449, while the pound dropped 0.53 percent to $1.21145.

The Australian fell 1.12% to $0.6826 and hit $0.6822, which is a level that hasn’t been seen since June 2020.

The New Zealand dollar fell 1.15 percent to $0.6175 for the first time since May 2020.

Early in the Asian morning, risky assets were already losing value, but losses grew quickly in the afternoon.

In Tokyo trading, both regional stocks and the yields on U.S. Treasury bonds went down.

Overnight, there was selling on Wall Street, which set the tone. This was because U.S. consumer spending data that was worse than expected sparked fears of an economic slowdown, which was caused by the Federal Reserve’s aggressive policy tightening.

The dollar is doing a tricky balancing act. It is going up when there are signs of a global recession but going down when there are signs of a U.S. recession.

After the spending data came out, the dollar index fell 0.32 percent overnight. On Friday, though, it went up because the same data caused Asian stocks to go down.

“USD sentiment has been getting worse as fears of a recession rise,” RBC Capital Markets strategists wrote in a note to clients. But focusing on U.S. growth in isolation has never been a good way to trade USD.

The strategists said that the chances of the US going into a recession without dragging the rest of the world down with it are very low.

They also said that during a global recession, the dollar and other “safe haven” currencies like the yen and Swiss franc would do better than commodity currencies and the pound.

The dollar index looks like it will gain 0.75 percent for the week, which would be its best week in four.

Since March, the Fed has raised the policy rate by 150 basis points. Half of that increase came last month, when the Fed made its biggest increase since 1994. The market is betting that at the end of this month, there will be another one of the same size.

Also, the European Central Bank is likely to raise interest rates this month for the first time in ten years, though economists disagree on how much they will go up.

The data on inflation in the euro zone that will be released later in the day will give the markets a better idea of how aggressive the ECB might be.

The euro is going to drop by 0.94 percent this week after hitting a two-week low of $1.0381 on Thursday. Investors think that Europe’s economic situation is worse than that of the United States, which is made worse by the war in Ukraine, which has caused an energy crisis.

This week, the value of the pound fell by 1.21 percent.

Since last Friday, the Australian dollar has lost 1.66 percent of its value.

The Reserve Bank of Australia will make a policy decision on Thursday of next week. The markets expect the key rate to go up by a half point. But that hasn’t helped Australia much. Instead, it has followed the drop in commodity prices as the global economy gets worse.

Westpac strategists wrote in a note that they have been arguing for a drop below $0.70 for a while and that they would give this drop time to play out, especially given the widespread pressures of stagflation and recession. They chose $0.6750 as the “next obvious target” for the currency.

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