Yen Steadies Near 160 Amid Hawkish Fed Bets and Geopolitical Tensions

The Japanese yen steadied near the closely watched 160-per-dollar level on Tuesday as investors weighed renewed U.S.-Iran fighting and expectations for a Federal Reserve interest rate hike. The yen's pair was around 159.81, after weakening past 160 in each of the previous two sessions.

The level has again become a major focus for currency markets because the yen has surrendered more than half the gains from a record bout of intervention that began in late July. Bessent said he believed the Japanese government and Bank of Japan would take actions to strengthen the yen, including further interest-rate hikes, which he told Japanese Finance Minister Satsuki Katayama and BOJ Governor Kazuo Ueda were needed.

The dollar eased on Tuesday as investors weighed the increasingly hawkish outlook for U.S. interest rates against Bessent's comments on Japan. Bloomberg swaps pricing showed a 74% probability of a Fed hike this month, up from 34% the day before Warsh's speech.