Yen hangs near 160 amid BOJ rate-hike bets, dollar wobbles

SINGAPORE: The yen steadied near the 160-per-dollar level on Tuesday after US Treasury Secretary Scott ​Bessent ramped up pressure on the Bank of Japan to hike rates later this month, while currency markets ‌kept a wary watch on renewed attacks in the Middle East.

US President Donald Trump threatened further strikes against Iran after the first exchange of direct attacks in a month as the six-month-long conflict shows no signs of ending. The fresh attacks sent Brent crude futures above $91 a barrel and Treasury yields higher.

The yen last bought 159.81 ​per dollar, having weakened past the 160 level in the two previous sessions. The yen firmed after Bessent said he ​believed Japan’s government and central bank would take action that leads to a stronger yen.

“I have information that ⁠the market doesn’t have, and it’s my belief that the Japanese government and the BOJ will do the things that will lead ​to a stronger yen,” Bessent told CNBC in an interview during a Group of 20 finance leaders’ gathering.

A rare joint intervention from the ​US and Japan at the end of July provided short-lived relief for the fragile yen, with the currency having since surrendered most of the gains from the joint action.

Markets are pricing in a 73% chance of a hike from the BOJ later this month, but analysts suggest there needs to be a ​much stronger follow-through by the central bank.

“For the yen, a September BOJ hike is already heavily anticipated,” said Charu Chanana, chief investment strategist ​at Saxo.

“With US yields still high and rising oil worsening Japan’s terms of trade, the yen probably needs a more hawkish BOJ path beyond September — ‌not just ⁠one hike — to sustainably move away from 160.”

The U.S. dollar was subdued, backing away from Friday’s gains as investors contended with rising odds of a hike from the Federal Reserve in September after last week’s hawkish remarks from Fed Chairman Kevin Warsh.

The euro was steady at $1.1623 after eking out a nearly 1% gain for August. Sterling last fetched $1.35575 after a 0.5% rise last month.

The dollar index , which measures the ​U.S. currency against six other units, ​eased to 99.37.

In his debut ⁠speech at the Jackson Hole symposium of central bankers, Warsh said the Fed will “have work to do” should inflation not appear to be cooling, stoking expectations of a possible rate hike in the upcoming ​Fed meeting in September.

Traders are pricing in a 65% chance of a Fed hike later this ​month, compared to 41% ⁠a week earlier, the CME FedWatch tool showed.

“It is notable that higher oil prices and Treasury yields have failed to support the USD,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.

“The overnight USD weakness may reflect markets reassessing whether Chair Warsh’s hawkish stance is sufficient ⁠to restore ​Fed credibility.

Rising expectations of a September BoJ rate hike also added further ​pressure on the USD.“

Investor attention will be on a slew of economic data later this week that will help guide whether the Fed will deliver a hike.

In other currencies, ​the Australian dollar was a touch firmer at $0.7172, while the New Zealand dollar fetched $0.5921.