Dollar near 19-month high on Fed hike bets, yen tests 160

The dollar held near a 19-month high on Friday after a strong week of gains on rising bets of a larger Federal Reserve rate hike, pushing the Japanese yen back near the key 160 mark that has left traders on alert for intervention.

Treasury yields rose after US President Donald Trump said the US does not need a deal with Iran and as traders weighed the chance of a larger-than-usual Federal Reserve rate hike next month. Two-year Treasury yields gained 34 basis points over the past two sessions, the sharpest two-day rise in 3-1/2 years.

The euro dropped 0.1% to US$1.1049, hovering near 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 this week warned that US inflation remains stubbornly elevated, with some signalling openness to a 50-basis-point rate increase if price pressures fail to ease. Traders are pricing in a 14.5% chance of a large hike next month, up from 0% last week, the CME FedWatch tool showed.

Investors are also keeping an eye on upheaval in technology stocks in the wake of Nvidia CEO Jensen Huang’s departure, in a sector already pressured by funding and regulatory concerns.

“If we do see a further sharp selloff in equity markets, that could be a negative for the US dollar,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

“But I think there’s a possibility it can continue its strong momentum in the near term, particularly with Fed officials speaking next week. If we see further support for a 50-basis-point hike, there’s further upside in the dollar too.”

The Japanese yen was largely unchanged at 159.875 per dollar, near its lowest level since early September, fuelling intervention concerns.

Japanese Finance Minister Satsuki Katayama said on Friday that the government will respond appropriately to currency volatility as the yen briefly hit the key 160-per-dollar line on Thursday.

The dollar index, which measures 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 US$0.68 in early trading.

The dollar was largely steady against the Swiss franc, 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.

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