The Yen held steady around 160 to the Dollar on Tuesday as US Treasury Secretary Scott Bessent increased pressure on the Bank of Japan to raise interest rates this month, while a selloff in bonds following renewed attacks in the Gulf kept investors on edge.
US President Donald Trump also threatened further strikes on Iran after the two sides exchanged direct attacks for the first time in a month, with the six-month conflict showing little sign of coming to an end.
The escalation pushed Brent crude futures above $91 a barrel and triggered a broad bond selloff. The 10-year US Treasury yield climbed to its highest level since January 2025, while Japan’s 10-year government bond yield briefly reached 3% for the first time in three decades.
Currency markets were relatively subdued, with the Yen last trading at 159.81 per Dollar after falling below the 160 mark in each of the previous two sessions, Reuters reports.
The Japanese currency strengthened after Bessent said he expected Japan’s government and central bank to take steps that would support 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.
Markets are now pricing in a 73% probability that the Bank of Japan will raise interest rates later this month.
Elsewhere, the US Dollar remained subdued on Tuesday, giving back some of Friday’s gains as investors weighed growing expectations of a Federal Reserve rate hike in September following hawkish comments from Fed Chair Kevin Warsh last week.
The Euro slipped 0.1% to $1.16045 after gaining nearly 1% in August, while Sterling stood at $1.35424 after rising 0.5% last month.
The Dollar index, which tracks the greenback against six major currencies, edged 0.1% higher to 99.514.
In his first speech at the Jackson Hole gathering of central bankers, Warsh warned that the Federal Reserve would “have work to do” if inflation fails to ease, strengthening expectations that policymakers could raise interest rates at their upcoming September meeting.
Markets are now pricing in a 65% probability of a Federal Reserve rate hike later this month, up sharply from 41% a week earlier, according to the CME FedWatch tool.
Investors will turn their attention to a series of economic data releases later this week, which could play a key role in shaping expectations for further Federal Reserve rate hikes.