The dollar is heading towards weekly gains today, Friday, as rising Treasury yields and increasing expectations of another interest rate hike by the Federal Reserve keep the U.S. currency near its highest levels in several months.
The strength of the dollar pushed the euro to a two-month low at $1.1370, marking its third weekly decline, the worst losing streak since the end of 2025. The British pound remained weak near its lowest level in three months at $1.3220 and is headed for its worst weekly performance in four months.
Markets quickly and strongly adjusted their interest rate expectations after the U.S. central bank tightened its monetary policy last week, while strong economic data and new concerns over energy supplies further bolstered this conviction. The currency also received support from a wave of bond selling, which pushed long-term U.S. Treasury yields to their highest levels in over 20 years.
The dollar index, which measures the performance of the U.S. currency against a basket of other currencies, rose more than one percent this week to its highest level in two months.
Oil prices surged more than three percent yesterday, Thursday, to their highest level in a week after a missile attack launched by the Houthis on Saudi Arabia exacerbated concerns about supply disruptions, increasing the likelihood of rising inflation.
The Japanese yen will continue to trade near its lowest level in three weeks at 158.8 against the dollar, after markets perceived that the Bank of Japan's rate hike to its highest level in 31 years and the tightening policy directions issued last week were insufficient.
However, movements remained limited, and traders remained cautious about the possibility of authorities intervening to support the currency after Tokyo issued a new verbal warning.
The Australian dollar rose slightly to $0.7015 while the New Zealand dollar steadied at $0.5663. The Reserve Bank of Australia is expected to raise interest rates by 25 basis points to 4.60 percent, the highest level in nearly 15 years, next week, which will be the last rate hike in a tightening monetary policy cycle.
The yuan's exchange rate outside of China stabilized at 6.715 against the dollar after the summit between U.S. President Donald Trump and Chinese President Xi Jinping in Washington showed no signs of significant progress on contentious issues such as artificial intelligence, trade, Taiwan, and the Iran war.