Dollar set for best week in two months as yen tests 160
TLT•The dollar was set to gain 0.9% for the week, its biggest rise since September, as traders increased bets on a larger Federal Reserve rate hike. The yen hovered at 159.90 per dollar, prompting Japanese officials to warn they would respond to currency volatility.
1. Dollar gains on rate bets
The dollar held near a 19-month high on Friday as rising U.S. yields and bets on a larger rate hike supported the currency. Two-year Treasury yields rose 33 basis points this week to about 4.85%, while traders priced in a 12.1% chance of a 50-basis-point Fed hike next month, up from zero last week.
2. Yen near intervention level
The yen was steady at 159.90 per dollar, near its weakest since early September, and down 0.9% this week. Japanese Finance Minister Satsuki Katayama said the government would respond appropriately to currency volatility. Japan spent 15.4 trillion yen ($96.5 billion) to support the currency after it fell to 163.99 per dollar in late July.
3. Other currencies and risks
The euro edged up 0.1% to $1.1065 but was on track for a 0.7% weekly loss. The Australian dollar has fallen about 3.4% this month, the largest decline among G10 currencies against the greenback. Monex’s Nick Rees said a Middle East peace deal was the biggest risk to dollar strength, as it could reduce support from high energy prices and the dollar’s safe-haven status.
