The US dollar was heading for its biggest weekly gain in two months on Friday, staying close to a 19-month high as traders increased their bets on a larger interest rate hike by the Federal Reserve next month. The yen, meanwhile, remained close to the 160-per-dollar mark, keeping the possibility of Japanese government intervention in focus.Stronger-than-expected US inflation data this week and comments from Federal Reserve officials have led traders to expect a bigger-than-usual rate hike next month.This has also pushed up US treasury yields. Two-year Treasury yields have risen around 32 basis points this week to nearly 4.84%, putting them on track for their biggest weekly rise since April 2025.According to the CME FedWatch tool, traders are pricing in a roughly 92% chance of a 25-basis-point rate hike next month.“The dollar is still firm and that’s driven by a robust jobs report and an acceleration of the CPI,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “We’ve had a series of hawkish comments from Fed officials this week including from (New York Fed President John) Williams and (Fed Governor Christopher) Waller.”The dollar index, which measures the US currency against a basket of currencies, rose 0.1% to 103.34. It remained close to its highest level since April 2025 and was heading for its biggest weekly rise since September. This would be its third consecutive week of gains.The euro fell 0.23% to $1.103 after touching its lowest level against the dollar since April 2025. It was also set for a fourth straight week of losses.The dollar gained 0.28% against the Swiss franc to 0.837, putting it on track to end two consecutive weeks of losses.Meanwhile, Japanese yen remained weak at 159.84 per dollar on Friday, close to its lowest level since early September. It has fallen around 1% this week and is heading for its biggest weekly decline since September.The yen’s fall has raised concerns about possible intervention by Japanese authorities. Finance Minister Satsuki Katayama said on Friday that the government would respond appropriately to currency volatility.Elsewhere, the Australian dollar fell 0.46% to $0.678. It has been the worst-performing G10 currency against the dollar so far this month. Australia is also the only G10 country where markets expect an interest rate cut next year.The New Zealand dollar slipped 0.29% against the greenback to $0.553 and was heading for its third consecutive week of losses.Cryptocurrencies also recorded losses. Bitcoin fell 4.73% to $68,126.21, while ethereum declined 5.02% to $1,914.61.
