The US dollar is expected to hit the best weekly performance in two months, and the yen is approaching the 160 mark, triggering intervention warnings

The Zhitong Finance App learned that the US dollar hovered near a 19-month high on Friday and is expected to record its biggest weekly gain in two months. Market bets that the Federal Reserve might increase interest rate hikes boosted US bond yields, while the yen hovered below the 160 mark, prompting Japan's Ministry of Finance to warn that it would respond to excessive fluctuations.

US President Trump said that the US does not need to reach an agreement with Iran. This statement heightened market concerns about Middle Eastern oil supply, pushed crude oil prices up, and raised inflation expectations, and US bond yields rose accordingly. This statement, along with hawkish statements by Federal Reserve officials and better-than-expected US inflation data this week, made traders begin to weigh whether the Federal Reserve may implement an unconventional rate hike next month.

The two-year US Treasury yield has risen 33 basis points to around 4.85% so far this week, which is expected to be the biggest weekly increase since 2024.

Nick Rees, head of macro research at Monex, said that the biggest risk facing the strengthening of the US dollar is the conclusion of a Middle East peace agreement, as this will weaken the support of high energy prices and safe-haven positions for the US dollar. “If this does not happen, we think the dollar will at least stay close to its current level and may even strengthen slightly for some time to come,” Rees said.

The euro rose slightly by 0.1% to $1.1065, after falling to its lowest level against the US dollar since April 2025. The euro fell 0.7% cumulatively this week, which is likely to be the biggest weekly decline since the end of September.

Federal Reserve officials warned this week that US inflation remains stubbornly high, and some officials suggested they are open to raising interest rates by 50 basis points if price pressure does not ease. According to the CME FedWatch tool, traders currently have a 12.1% chance of raising interest rates by 50 basis points next month, up from 0% last week.

The US dollar index, which measures the trend of the US dollar against a basket of currencies, reported 103.17, close to the highest level since April 2025. The US dollar is expected to rise 0.9% this week, the biggest weekly gain since September last year.

The yen intervention attracted much attention

The yen remained flat at 159.90 against the US dollar, hovering near its weakest level since the beginning of September, raising concerns about possible intervention in the market. The yen fell 0.9% cumulatively this week, which is likely to be the biggest weekly decline since September.

Japan's Finance Minister Katayama Satsuki said on Friday that the government will respond appropriately to exchange rate fluctuations.

Japan used 15.4 trillion yen (about 96.5 billion US dollars) to support the exchange rate after the yen fell to a 40-year low of 163.99 against the US dollar at the end of July.

Monex's Rees said the market will remain cautious around this level, and he expects the trigger point for intervention to be slightly above 160.

The Australian dollar has fallen by about 3.4% so far this month, making it the worst performing G10 currency against the US dollar. Australia is the only G10 economy whose market pricing will cut interest rates next year. The Australian dollar was last reported at $0.6794.

The dollar did not change much against the Swiss franc, at 0.836, and hovered near a one-month high.

On the cryptocurrency side, Bitcoin fell 3.8% to $68,759, falling below the $70,000 key level, the lowest since August. Ethereum also fell 4% to $1,933.49.