Dollar gains on rate hike expectations, yen retreats past 160

On September 1, the U.S. dollar experienced a rise in value due to concerns over Iran's attacks on the Gulf and worries about inflation. At the same time, the Japanese yen dropped below 160 per dollar for the third consecutive day. The U.S. president, Donald Trump, threatened additional strikes against Iran, which contributed to the dollar's strength.

This push in the dollar was further backed by an increase in the yield of 10-year Treasury notes, reaching its highest level since January 2025. The yen, meanwhile, touched a 30-year high of 3 percent.

U.S. Treasury Secretary Scott Bessent expressed confidence that Japan's government and central bank would take actions to strengthen the yen. The Bank of Japan's potential rate hike in September was now more certain, putting additional pressure on the bank to increase its hikes going forward. Despite the rise in yields and Bessent's comments, the yen continued to decline and traded at 159.99 per dollar, which is viewed as a risk of Japanese intervention.

Market strategist Joel Kruger noted that investors remain skeptical about the effectiveness of verbal pressure on the yen's weakness and emphasize the need for a more aggressive stance from the Bank of Japan or direct intervention.