Key facts
- The dollar reached a two-week high as markets increased bets on a Federal Reserve rate hike.
- The yen weakened past 160 per dollar, a threshold that could prompt intervention.
- U.S. Treasury Secretary Scott Bessent expects Japan to take action to strengthen the yen.
- Bessent signaled a strong chance of a Bank of Japan interest rate hike in September.
- The U.S. Treasury plans to impose weekly secondary sanctions on Iran, starting with banks.
- Scott Bessent will advocate for G20 members to consider trade barriers on China.
The dollar held near a two-week high as markets increased bets on a Federal Reserve rate hike following hawkish comments from former Fed Chair Kevin Warsh. Warsh indicated that the U.S. central bank would need to act if inflation does not show signs of returning to the 2% target, fueling speculation of a September rate increase. The implied probability of a move next month rose to 57%, and yields on two-year U.S. Treasury notes reached a more than one-month high of 4.33%.
The yen weakened past the 160-per-dollar level, a closely watched threshold that could prompt intervention. U.S. Treasury Secretary Scott Bessent commented that recent yen movements were 'pretty well contained' and not disorderly, and expressed confidence that Bank of Japan Governor Kazuo Ueda would 'do the right thing' regarding monetary policy. Bessent later stated he believes the Japanese government and the Bank of Japan will take action that leads to a stronger yen, suggesting a strong chance the BOJ will raise interest rates at its next policy meeting in September.
In other developments, U.S. Treasury Secretary Scott Bessent announced that the U.S. Treasury plans to impose weekly secondary sanctions on Iran, starting with banks. He also stated that the world must 'grow our way out' of high debt levels, urging G20 members to push harder for economic growth to counter concerns over rising global debt. Bessent will also urge G20 members to consider trade barriers on China to reduce global imbalances, noting China's large trade surplus and weak economy.