The U.S. dollar held near a 19-month high on Friday after a week of gains, as rising expectations of a larger Federal Reserve interest-rate increase lifted Treasury yields and pushed the Japanese yen close to a level that has heightened intervention concerns.
The euro slipped 0.1% to $1.1049, near its weakest level against the dollar since April 2025. It was down 0.8% for the week, putting it on track for its largest weekly decline since late September. The dollar index, which measures the greenback against a basket of major currencies, edged down 0.05% to 103.17 but remained near its highest level since April 2025.
U.S. two-year Treasury yields rose 34 basis points over the previous two sessions, their sharpest two-day increase in three and a half years. The rise followed comments by President Donald Trump that the United States did not need a deal with Iran, as well as market reassessments of the likelihood of a larger-than-usual Federal Reserve rate increase next month.
Fed officials have warned this week that U.S. inflation remains stubbornly high. Some have indicated they would be open to a 50-basis-point increase if price pressures do not ease. Traders are now assigning a 14.5% probability to such a move next month, compared with no probability priced in a week earlier, according to the CME FedWatch tool.
Currency markets are also tracking turmoil in technology stocks following the departure of Nvidia chief executive Jensen Huang, against a broader backdrop of concerns about funding and regulation in the sector. A sharp further fall in equities could weigh on the dollar, said Carol Kong, a currency strategist at Commonwealth Bank of Australia. However, she said the dollar could extend its gains in the near term if upcoming Fed commentary lends further support to the possibility of a 50-basis-point rate increase.
The yen was little changed at 159.875 per dollar, near its weakest level since early September. It briefly touched the closely watched 160-per-dollar threshold on Thursday. Japanese Finance Minister Satsuki Katayama said on Friday that the government would respond appropriately to currency volatility, as traders remained alert to possible intervention.
The Australian dollar has fallen about 2.5% over the past month, making it the weakest-performing Group of 10 currency against the greenback over that period. It is also the only G10 currency for which markets are pricing in interest-rate cuts next year. The Australian dollar was last trading at $0.68 in early dealings.
The dollar was broadly steady against the Swiss franc at 0.835, close to a one-month high.
Oil-market developments added to the backdrop of uncertainty. U.S. crude futures settled 2.55% higher on Thursday after attacks by Iran-aligned Houthi forces on Saudi energy infrastructure escalated and shipping disruptions continued in the Strait of Hormuz.