Dollar Dips on Oil Price Easing, Yen Strengthens on Japan's Intervention Warning

The US dollar dipped on Friday as oil prices eased, but was poised for its second straight weekly advance due to growing rate hike bets. The dollar index fell 0.3% and was on track for its biggest daily percentage drop in about three weeks.

The decline comes despite expectations of a rate hike from the Fed at its October meeting standing at about 66%, up from about 58% a week earlier. This increase has boosted market expectations for more aggressive monetary policy, helping to spark a surge in US Treasury yields.

According to Eugene Epstein, head of trading and structured products at Moneycorp, 'We've had a pretty aggressive rally in the dollar over the last couple of days and maybe it's a little stretched, just taking a little breather.'

The Japanese yen strengthened 1.06% on Friday, its biggest daily gain against the dollar since September 7, to 157.13, after Japan's Finance Minister Satsuki Katayama said US President Donald Trump raised concern about yen weakness during a summit with Japanese Prime Minister Sanae Takaichi earlier this week.

The yen was on track for a second weekly fall, however, as markets judged the Bank of Japan's rate hike last week to be insufficiently hawkish. The dollar strengthened 0.11% to 6.723 versus the offshore Chinese yuan, but the euro was up 0.15% at $1.1396.