The dollar was set for its biggest weekly gain in two months, up 0.9%, as traders increased bets on a larger Federal Reserve rate hike. The yen hovered at 159.89 per dollar, near the 160 level that has raised intervention concerns.
The dollar held near a 19-month high on Friday as higher US yields and expectations of a larger Federal Reserve rate hike next month supported the currency. Two-year Treasury yields rose 34 basis points over two sessions to 4.8602%, their sharpest two-day increase in 3-1/2 years. Traders priced in a 14.5% chance of a 50-basis-point hike next month, up from zero a week earlier.
The yen was steady at 159.89 per dollar after briefly reaching 160 on Thursday, and was on track for its biggest weekly loss since September. Japan's finance minister said the government would respond appropriately to currency volatility; Japan spent 15.4 trillion yen to support the currency after it fell to 163.99 per dollar in late July. The Australian dollar has fallen about 2.5% over the past month, while the euro was down 0.7% for the week.
