Yen tests 160 per dollar as Treasury yields jump on Fed hike bets

The yen was testing the 160 level against the dollar on Friday, 13 November. USD/JPY stood at 159.94 in Tokyo at 12:01 local time, little changed from the previous close of 159.84. The dollar is trading near a 19-month high.

The move extends a rise in US yields reported earlier in the week, when traders began to weigh the chance of a larger-than-usual Federal Reserve rate hike next month.

What happened

US government bond yields climbed after President Donald Trump stated that Washington has no need of an agreement with Iran. Traders also considered the possibility of a bigger Fed move at its next meeting. Two-year Treasury yields gained 34 basis points over the past two sessions. The report describes this as the sharpest rise in three and a half years.

The two-year yield is closely tied to the path of the policy rate. A fast rise suggests that investors are pricing a more aggressive path for US interest rates. That supports the dollar against currencies with lower yields, such as the yen.

On Friday, the dollar-yen pair moved by only 0.10 on the day, a change of 0.06%. The pair is flat, but it sits right at a level that markets watch closely.

Why it matters

A dollar near 160 yen raises the cost of dollar-priced imports for Japan, including energy and food. Japan relies on imports for much of both. A weak yen also lifts the yen value of overseas earnings for exporters, which is why currency moves matter for corporate results across Asia.

The comments on Iran add a geopolitical element to the rate story.

For the wider region, a stronger dollar and higher US yields can pressure Asian currencies and raise funding costs. Capital flows often respond to the gap between US and local interest rates.

What to watch next

The next focus is the Federal Reserve meeting next month, where traders are weighing a larger-than-usual rate hike. Any US data or Fed comment before then may move Treasury yields again.

For USD/JPY, the question is how the pair behaves around the 160 mark in the coming sessions. Further statements from the US administration on Iran may also affect yields and the dollar.