Dollar Surges as Iran Tensions Fuel Bond Selloff and Yen Weakens Past 160

The US dollar strengthened on September 1 as tensions between the US and Iran escalated, pushing inflation worries to the forefront. The bond market suffered a selloff due to these concerns.

US President Donald Trump's threat of further strikes against Iran caused Brent crude futures to surge past $92 per barrel. This increase in oil prices fueled fears of higher inflation, prompting investors to flee bonds and seek safer assets like the dollar.

The 10-year Japanese government bond yield touched a 30-year high of 3%, while the yield on 10-year Treasury notes reached its highest level since January 2025. US Treasury Secretary Scott Bessent stated that he believed Japan's government and central bank would take action to strengthen the yen.

Despite this, the yen continued to weaken, falling below 160 per dollar for the third straight session. Analysts attributed this decline to doubts about the Bank of Japan's willingness to tighten policy.