The Dollar was on track for its first consecutive weekly gains in more than three months on Friday, supported by a sharp rise in Treasury yields and growing expectations that the Federal Reserve could raise interest rates further, keeping the greenback close to multi-month highs.
The Dollar’s strength pushed the Euro down to a two-month low of $1.1370, leaving it headed for a third straight weekly decline, its longest losing run since late 2025. Sterling remained near a three-month low of $1.3220 and was set for its weakest weekly performance in four months.
Markets have sharply revised their expectations for the path of interest rates following the Federal Reserve’s policy tightening last week. Strong economic data, renewed concerns over energy supplies and a series of hawkish comments from Fed officials have added to expectations of further rate increases.
A selloff in US government bonds has also supported the Dollar, with long-term Treasury yields climbing to their highest levels in more than two decades.
The Dollar index, which tracks the greenback against a basket of major currencies, has gained over 1% this week to reach a two-month high, putting it on course for consecutive weekly gains for the first time since June. However, the rally showed signs of easing on Friday, with the index trading slightly lower at 101.2.
While higher yields should provide support for the Dollar, lingering concerns over the US fiscal outlook and uncertainty surrounding US policymaking continue to weigh on the currency, Reuters reports.
Bucking the broader strength of the Dollar, the Japanese Yen rebounded more than 0.4% from a three-week low to trade at 158.15 per Dollar.
The move came after Japan’s Finance Minister Satsuki Katayama said US President Donald Trump had raised concerns about the Yen’s weakness during a meeting with Japanese Prime Minister Sanae Takaichi earlier this week.
Katayama said the comments reaffirmed the shared US-Japan principles underpinning their joint intervention in July. She added that she and US Treasury Secretary Scott Bessent would remain in close contact as policymakers stepped up warnings over renewed weakness in the Yen.
Despite the rebound, the Yen remains on course for a second consecutive weekly decline. Markets had earlier viewed the Bank of Japan’s decision to raise interest rates to a 31-year high, along with its latest policy guidance, as falling short of expectations for a more hawkish stance.
Elsewhere, the Australian Dollar edged up to $0.7018, while the New Zealand Dollar was little changed at $0.5659. The Reserve Bank of Australia is widely expected to lift interest rates by 25 basis points next week to 4.60%, their highest level in nearly 15 years. The move would mark the final increase in the current tightening cycle.