Investing.com — Asian currencies were mostly under pressure on Friday as the U.S. dollar extended its rally to a two-month high, while the Japanese yen weakened toward the closely watched 160-per-dollar level amid renewed intervention risks.
Rising Treasury yields, stronger U.S. economic data and growing expectations for further Federal Reserve rate hikes continued to support the greenback.
The U.S. dollar index was around 101.23, little changed in early Asian trading after rising for a fourth straight day. Its gain slowed to about 0.2% on Thursday from 0.5% on Wednesday, with the index now up about 1.1% this week, matching last week’s pace.
The USD/JPY pair was around 158.46, down 0.3%, after the yen weakened as far as 159.04 on Thursday, its weakest level since September 2. Markets are again watching 160 as a potential test of Japan’s tolerance for further yen weakness.
Dollar gains as yields, rate-hike bets rise
The dollar’s latest advance came alongside a renewed rise in U.S. Treasury yields after economic data pointed to firm activity and persistent price pressures.
The 30-year Treasury yield climbed to its highest level since June 2004, while the benchmark 10-year yield reached its highest level in nearly two decades.
Weekly initial jobless claims fell by 1,000 to 197,000, below the 201,000 estimate in a Reuters poll, suggesting the labor market is continuing to hold up.
Since the Fed raised rates by 25 basis points last week to 3.75%-4.00%, several officials have indicated that further increases could be needed if inflation fails to moderate. The latest signals have strengthened expectations for another hike.
Oil prices are adding to the inflation pressure. Crude rose almost 4% in volatile trading after a Houthi missile attack on Saudi Arabia revived concerns over supply disruptions, although gains eased after reports that the U.S. and Iran had discussed reopening the Strait of Hormuz.
Yen nears 160 as intervention risk returns
The yen has declined for two weeks following the BOJ’s September 18 policy meeting, when the central bank accelerated its tightening cycle but delivered a decision that included dissent on the board.
