Story
Asian Currencies Weaken as Dollar Hits Two-Month High, Yen Nears 160
Summary
The U.S. dollar climbed to a two-month peak, pressuring most Asian currencies, as rising Treasury yields and expectations of further Federal Reserve rate hikes bolstered the greenback. The Japanese yen weakened toward the closely watched 160-per-dollar level, renewing speculation of potential government intervention.
Most Asian currencies retreated on Friday as the U.S. dollar extended its rally to a two-month high, driven by a surge in Treasury yields and persistent expectations for a hawkish Federal Reserve. The Japanese yen neared the critical 160-per-dollar mark, placing markets on alert for potential intervention from Japanese authorities.
Dollar Rally Gains Momentum
The dollar's strength is underpinned by robust U.S. economic data and a corresponding rise in Treasury yields. The benchmark 10-year Treasury yield reached its highest level in nearly two decades, while the 30-year yield climbed to a peak not seen since June 2004. This move was supported by data showing weekly initial jobless claims fell to 197,000, below estimates and suggesting continued resilience in the labor market.
Following the Federal Reserve's recent rate increase, several officials have signaled that further hikes may be necessary to curb inflation. In early Asian trading, the U.S. dollar index, which measures the greenback against a basket of currencies, hovered around 101.23 after rising for a fourth consecutive day. The index is up approximately 1.1% for the week, according to Investing.com.
Yen Approaches Intervention Threshold
The Japanese yen has been a focal point for investors, with the USD/JPY pair trading around 158.46 after the yen weakened to 159.04 on Thursday. The 160 level is widely viewed by traders as a potential line in the sand that could trigger intervention by Japan's Ministry of Finance to support its currency.
AdThe yen's decline stems from the widening interest rate differential between the U.S. and Japan. While the Fed maintains a firm tightening outlook, the Bank of Japan's recent policy moves were viewed by markets as insufficiently hawkish, placing sustained downward pressure on the yen.
Regional Currencies Under Pressure
The dollar's broad-based strength has impacted other regional currencies. The Australian dollar was the week's biggest loser against the greenback, falling 1.6% according to DBS bank. The Aussie's slide was exacerbated by domestic data showing Australia's unemployment rate rose to 4.6% in August, its highest since 2021.
Elsewhere in the region, the Chinese yuan also faced renewed pressure, with the USD/CNY pair rising to 6.7133. The Australian dollar traded around $0.7014, while the New Zealand dollar was near $0.5659.
Read next
More on Forex
30-Year Treasury Yield Hits 2004 High as Bond Market Sell-Off Deepens
The yield on the 30-year U.S. Treasury bond surged to its highest level since 2004 amid a deepening market rout, driven by strong economic data, rising energy prices, and hawkish signals from the Federal Reserve.
Dollar Hits Two-Month High as Strong Data, Yield Surge Revive Fed Hike Bets
The U.S. dollar extended its rally to a fourth day, reaching a two-month peak after robust economic data and a surge in Treasury yields fueled market expectations for another Federal Reserve interest rate hike.
British Pound Falls Toward 3-Month Low as Dollar Strength Persists
The British pound declined on Thursday, approaching its lowest closing level since late June as a broad-based rally in the U.S. dollar continued, fueled by elevated Treasury yields and expectations for a hawkish Federal Reserve.
Hungarian Central Bank Endorses Stronger Forint to Combat Inflation
The Hungarian National Bank (MNB) has identified a sustained appreciation of the forint as a core element of its strategy to meet revised inflation targets, arguing the benefits for price stability outweigh potential impacts on growth.