The dollar remained close to a 19-month high on Friday, following a robust week of gains fuelled by increasing expectations of a more substantial Federal Reserve rate hike. This movement has brought the Japanese yen back near the critical 160 level, prompting traders to remain vigilant for potential intervention. Treasury yields increased following statements from US President Donald Trump indicating that a deal with Iran is unnecessary, while traders considered the likelihood of an above-average Federal Reserve rate hike in the upcoming month. Two-year Treasury yields increased by 34 basis points in the last two sessions, marking the most significant two-day rise in three and a half years. The euro declined by 0.1% to $1.1049, remaining close to its lowest point against the dollar since April 2025.
For the week, it experienced a decline of 0.8%, positioning it for its most significant weekly loss since late September. Federal Reserve officials this week cautioned that inflation in the United States continues to be persistently high, with certain members indicating a willingness to consider a 50-basis-point rate hike should price pressures not subside. Traders are now assigning a 14.5% probability to the prospect of a significant rate increase next month, a notable rise from the 0% likelihood observed the previous week, according to the CME FedWatch tool. Investors are monitoring the turmoil in technology stocks following the departure of Nvidia CEO Jensen Huang, in a sector already facing challenges related to funding and regulatory issues. “If we do see a further sharp selloff in equity markets, that could be a negative for the US dollar,” said Carol Kong.
“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 remained relatively stable at 159.875 per dollar, hovering close to its lowest point since early September, which has raised concerns regarding potential intervention. Japanese Finance Minister Satsuki Katayama stated on Friday that the government will respond appropriately to currency volatility, as the yen briefly reached the significant 160-per-dollar threshold 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 depreciated approximately 2.5% over the preceding month, positioning it as the least performing currency among the G10 against the US dollar, and uniquely reflecting expectations of rate cuts for the upcoming year. It was last observed at $0.68 during the early trading session. The dollar maintained a stable position against the Swiss franc at 0.835, remaining close to a one-month peak. US crude futures experienced a 2.55% increase on Thursday, following escalated attacks by Yemen’s Iran-aligned Houthis on Saudi energy infrastructure and ongoing shipping disruptions in the Strait of Hormuz.
