Investing.com — Asian currencies were mixed on Tuesday, while the Japanese yen weakened toward recent lows as markets remained alert to intervention risks and assessed the Bank of Japan’s policy path. The U.S. dollar held near a two-month high, while the Australian dollar awaited a widely expected interest rate hike.
Volatile oil prices and a sharp rise in Treasury yields supported the dollar, although gains were limited as investors waited for U.S. data later this week for clues on the Federal Reserve’s rate path.
The U.S. dollar index was around 101.21, little changed, after reaching 101.27 earlier. It is on track for a 1.8% gain in September, which would be its strongest monthly performance since June. The USD/JPY pair was around 157.36.
Brent crude was around $106 a barrel as markets remained skeptical about renewed diplomatic efforts to end the U.S.-Iran conflict after President Donald Trump rejected Tehran’s ceasefire proposal. The uncertainty has kept energy-supply risks elevated.
Dollar supported by yields, Fed hike bets
A selloff in U.S. Treasuries has pushed yields to fresh multi-year highs. The 10-year Treasury yield has climbed to its highest level since 2007, while the 30-year yield reached its highest since 2004.
The higher yields have supported the dollar, but the boost has been restrained as markets have become less reactive to oil-price swings and the global bond selloff has lifted yields elsewhere as well.
U.S. data due later this week could revive the rate debate. The PCE price index is due Wednesday, followed by nonfarm payrolls on Friday, with both expected to reinforce the case for additional Fed tightening.
Markets are now pricing more than a 70% chance of a Fed rate hike at the end of October, up from 57% a week ago.
Yen weakens as intervention warning returns
The yen weakened to around 157.36 per dollar, giving back much of Monday’s earlier advance after Japan’s top currency official Atsushi Mimura warned markets to heed a “very clear” message from Japan and the U.S. about excessive yen weakness.
The yen had strengthened as much as 0.4% to 156.51 on Monday, its strongest level since September 18, after Mimura’s comments, but that move later faded.
