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On predictions that U.S. interest rates are nearing a high, Japan’s yen rose on Friday and is on track for its greatest weekly rise in four months against the dollar after data showed on Thursday that the world’s largest economy unexpectedly fell in June.

Interest rates in the United States are expected to peak in December this year, compared to June 2023 at the start of July. The Federal Reserve will decrease interest rates by 50 basis points next year to support the slowing economy.

The quick decline in rate hike expectations has been a major driver of the dollar’s weakening against the yen, with the greenback falling almost 2.5 percent this week vs. the Japanese yen, its worst weekly drop since late March.

Despite a recent pullback, the yen was the primary short of the growing interest rate differential trade between the United States and its global counterparts, with short yen bets exceeding historical averages at $5.4 billion.

The yield spread between 10-year U.S. Treasuries and similar Japanese government paper has shrunk by 70 basis points since June, as concerns of slowing U.S. growth and rising interest rates pushed Treasury yields lower.

The U.S. dollar was also widely down worldwide on Friday, with the dollar index heading for a second weekly loss. It dropped 0.5 percent to 105.680, its lowest level since July 5.

However, risk appetite was restricted, with the euro struggling to hold above $1.02 on fears of a eurozone recession by the end of the year.

Inflation in the eurozone reached a new high in July, and its peak could be months away, putting pressure on the European Central Bank to hike interest rates again in September.

Consumer price increase in the 19 eurozone countries rose to 8.9 percent in July from 8.6 percent the previous month, significantly exceeding predictions of 8.6 percent and well over the ECB’s 2 percent objective, Eurostat, the EU’s statistics agency, reported on Friday.

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