Dollar near 19-month high on Fed hike bets, yen tests 160
TLT•The dollar held near a 19-month high as traders raised bets on a larger Federal Reserve rate hike, while the yen traded near 160 per dollar, a level that has prompted intervention concerns. Traders priced in a 14.5% chance of a 50-basis-point hike next month, up from zero a week earlier.
1. Rate hike bets lift dollar
The dollar held near a 19-month high on Friday after a week of gains as traders weighed the chance of a larger-than-usual Federal Reserve rate increase next month. Two-year Treasury yields rose 34 basis points over two sessions, their sharpest two-day rise in 3-1/2 years.
2. Fed signals and market pricing
Fed officials warned that US inflation remains stubbornly elevated, with some signalling openness to a 50-basis-point increase if price pressures do not ease. Traders priced in a 14.5% chance of a large hike next month, up from 0% last week.
3. Yen nears intervention threshold
The yen was largely unchanged at 159.875 per dollar, near its lowest level since early September. Japan’s finance minister said the government would respond appropriately to currency volatility after the yen briefly touched 160 per dollar on Thursday. The euro fell 0.1% to $1.1049, while the Australian dollar was at $0.68.
