Dollar set for weekly gains amid expectations of US rate hike

The dollar, on Friday, is set to post weekly gains as higher Treasury yields and rising expectations that the Federal Reserve (the US central bank) will raise interest rates again have kept the US currency near its highest levels in several months.

The euro was pushed to a two-month low at $1.1370 by the dollar, putting it on track for a third weekly decline — its worst losing streak since the end of 2025. The pound sterling also remained down near a three-month low at $1.3220 and is heading for its worst weekly performance in four months.

Markets rapidly and sharply revised their interest-rate expectations after the US central bank tightened policy last week, while strong economic data and fresh concerns about energy supplies further cemented that view. The currency was also supported by a wave of bond selling that pushed long-term US Treasury yields to their highest levels in more than 20 years.

The dollar index, which measures the US currency against a basket of peers, rose by more than 1% this week to a two-month high.

Oil jumped more than 3% on Thursday to a one-week high after a Houthi missile attack on Saudi Arabia heightened fears of supply disruptions, increasing the chances of higher inflation.

The Japanese yen continued to trade near a three-week low at 158.8 per dollar after markets concluded that the Bank of Japan's raising of interest rates to their highest level in 31 years and the tightening guidance issued last week were insufficient.

However, moves remained limited and dealers stayed cautious about the possibility of authorities intervening to support the currency after Tokyo issued a fresh verbal warning.

The Australian dollar rose slightly to $0.7015 while the New Zealand dollar was steady at $0.5663. The Reserve Bank of Australia is expected to raise interest rates by 25 basis points to 4.60%, the highest in nearly 15 years, next week — a move that would likely be the final hike in this tightening cycle.

The offshore yuan was steady at 6.715 per dollar after the summit in Washington between US President Donald Trump and Chinese President Xi Jinping showed no signs of major progress on thorny issues such as artificial intelligence, trade, Taiwan and the war in Iran.