Written by The Banking Post
The US dollar remained near a 19-month high on Friday after a strong week of gains, as growing expectations of a larger Federal Reserve (Fed) interest rate hike put pressure on major currencies. The Japanese yen, meanwhile, hovered near the key 160-per-dollar level, raising concerns about possible government intervention.
US Treasury yields climbed after President Donald Trump said Washington did not need a deal with Iran, while investors assessed the possibility of a larger-than-usual Fed rate increase next month.
The two-year Treasury yield rose 34 basis points over the past two sessions, marking its sharpest two-day increase in three and a half years.
The euro fell 0.1% to $1.1049, hovering near its lowest level against the dollar since April 2025. It has lost 0.8% this week, putting it on track for its biggest weekly decline since late September.
Expectations of tighter US monetary policy have strengthened following warnings from Fed officials that inflation remains stubbornly high. Some policymakers have indicated they would consider a 50-basis-point rate hike if price pressures fail to ease.
Markets are now pricing in a 14.5% probability of a half-percentage-point increase next month, up from zero a week earlier, according to the CME FedWatch tool.
Investors are also monitoring volatility in technology stocks following the departure of Nvidia CEO Jensen Huang, amid broader concerns over funding and regulatory pressures in the sector.
Carol Kong, currency strategist at Commonwealth Bank of Australia, said a further sharp selloff in equity markets could weigh on the dollar. However, she added that the currency could maintain its upward momentum in the near term, particularly if upcoming comments from Fed officials reinforce expectations of a larger rate hike.
The Japanese yen was little changed at 159.875 per dollar, remaining close to its weakest level since early September. The currency briefly touched the 160-per-dollar threshold on Thursday, prompting renewed concerns over possible intervention by Japanese authorities.
Finance Minister Satsuki Katayama said on Friday that the government would respond appropriately to excessive currency volatility.
Meanwhile, the dollar index, which measures the greenback against a basket of major currencies, edged down 0.05% to 103.17 but remained near its highest level since April 2025.
Among other currencies, the Australian dollar has fallen around 2.5% over the past month, making it the weakest-performing G10 currency against the greenback. It was trading at around $0.68 on Friday. Australia is also the only G10 economy where markets are pricing in interest rate cuts next year.
The dollar was largely steady against the Swiss franc at 0.835, hovering near a one-month high.
Geopolitical tensions also continued to influence currency and financial markets. US crude futures settled 2.55% higher on Thursday after attacks by Yemen’s Iran-aligned Houthi group on Saudi energy infrastructure escalated, while shipping disruptions persisted in the Strait of Hormuz.
