Dollar Surges as Iran Tensions Fuel Global Bond Sell-Off
The US dollar strengthened on September 1 as renewed tensions between the US and Iran fueled inflation worries, prompting a global bond sell-off. The yen slid past 160 per dollar for the third straight session, despite mounting pressure on the Bank of Japan to raise interest rates.
The US-Iran hostilities led to Brent crude futures rising above $92 a barrel, exacerbating inflation concerns and triggering a bond sell-off. The yield on 10-year Treasury notes reached its highest since January 2025, while the 10-year Japanese government bond yield touched 3% for the first time in 30 years.
US Treasury Secretary Scott Bessent expressed confidence that Japan's government and central bank would take action to strengthen the yen. However, this did not halt the yen's decline, which has been driven by concerns over Japan's still-unfavorable interest rate differential with the US.