The US dollar maintained its position near a 19-month high on Friday, driven by growing expectations of a larger Federal Reserve rate hike. This surge pushed the Japanese yen close to the critical 160-per-dollar mark, raising concerns among traders about potential government intervention.
Treasury yields climbed following remarks by US President Donald Trump, who stated that the US does not need a deal with Iran. Traders also weighed the possibility of a significant Federal Reserve rate increase next month. Two-year Treasury yields rose by 34 basis points over the past two sessions, marking the sharpest two-day increase in 3-1/2 years.
The euro fell 0.1% to $1.1049, nearing its lowest level against the dollar since April 2025. For the week, it was down 0.8%, on track for its largest weekly loss since late September. Fed officials have warned that US inflation remains elevated, with some suggesting a 50-basis-point rate increase if price pressures persist. Traders are now pricing in a 14.5% chance of such a hike next month, up from 0% last week.
Investors are also monitoring the technology sector after Nvidia CEO Jensen Huang's departure, amid existing pressures from funding and regulatory concerns. Carol Kong, currency strategist at Commonwealth Bank of Australia, noted that a sharp selloff in equity markets could negatively impact the US dollar. However, she believes the dollar's strong momentum may continue in the near term, especially if Fed officials support a 50-basis-point hike next week.
The Japanese yen remained largely unchanged at 159.875 per dollar, near its lowest level since early September, fueling intervention concerns. Japanese Finance Minister Satsuki Katayama stated that the government will respond appropriately to currency volatility as the yen briefly hit the 160-per-dollar line on Thursday.
The dollar index, measuring the greenback against a basket of currencies, was last down 0.05% at 103.17, remaining at its highest since April 2025. The Australian dollar has fallen about 2.5% over the past month, making it the worst-performing G10 currency against the greenback and the only one where rate cuts are being priced in for next year. It was last at $0.68 in early trading. The dollar was largely steady against the Swiss franc at 0.835, hovering near a one-month high.
US crude futures closed 2.55% higher on Thursday after attacks by Yemen's Iran-aligned Houthis on Saudi energy infrastructure escalated and shipping disruptions persisted in the Strait of Hormuz.