Dollar Rises as Yen Falls Below 160 Amid Global Bond Selloff

The dollar strengthened on Tuesday as renewed Gulf attacks sparked a global bond selloff and stoked inflation worries, while the yen slid past 160 per dollar again. The U.S. President Donald Trump threatened further strikes against Iran after the first exchange of direct attacks in a month, pushing Brent crude futures above $91 a barrel, fuelling inflation worries and spurring a bond selloff.

The yield on 10-year Treasury notes hit its highest since January 2025, while the 10-year Japanese government bond yield touched 3% for the first time in 30 years. U.S. Treasury Secretary Scott Bessent said he believed Japan's government and central bank would take action that leads to a stronger yen.

The Bank of Japan was already widely expected to lift rates in September, but Bessent's comments effectively locked the bank into doing so and put pressure on it to step up hikes going forward. However, neither the jump in yields nor Bessent's comments were enough to arrest the yen's decline, with the currency trading at 159.99 per dollar after breaching 160 for the third straight session.