Dollar Heads for Best Week Since September as Fed Rate Bets Build, Yen Nears 160

The dollar steadied near a 19-month high on Friday as traders grew more convinced the Federal Reserve will raise interest rates in December. The greenback was set to add 0.8% this week, its third straight week of gains, while the Japanese yen tested 160 for the first time since September.

The move pressured broader currency markets. The euro steadied in early Friday trade, while the pound fell 0.06%. Markets held back before a wave of key economic indicators from China and Japan due next week.

Fed bets lift dollar

The dollar index and dollar index futures steadied on Friday but stayed close to their highest levels since early-2025. Growing bets on a December rate hike by the Fed supported the currency. Producer price index inflation for October is due later on Friday. Any signs of sticky inflation would likely strengthen the case for more rate hikes by the Fed. The central bank has largely maintained its annual inflation target of 2%, spurring bets that more rate hikes will be needed to meet the target. Several Fed policymakers were also set to speak on Friday.

Yen back on intervention watch

The Japanese yen tested lows last seen in September, drawing renewed threats of currency market intervention from Japanese authorities. Top Japanese currency diplomat Atsushi Mimura said on Thursday it was "too early to forget" September's intervention. Weakness in the yen comes chiefly from growing bets that a gulf between Japanese and U.S. interest rates will persist in the coming months, even as the Bank of Japan prepares to further raise rates. Japanese gross domestic product data for the third quarter and key consumer price index inflation data for October are due next week. Both prints are likely to factor into the BOJ's plans for rates.

Asia currencies mixed

The Chinese yuan's USD/CNY pair moved little on Friday but was in sight of recent four-year highs. The Singapore dollar's USD/SGD pair was flat but close to its highest level since end-July. The South Korean won's USD/KRW pair fell 0.3%. The Indian rupee's USD/INR pair rose 0.1% but remained well below recent record highs, as a drop in oil prices aided the currency. The Australian dollar's AUD/USD pair fell slightly on Friday and came close to its weakest levels in 2026. Broader currency markets dithered, given that higher U.S. rates herald more pressure on high-yielding, risk-heavy currencies, as they tend to narrow the gap between yields on the relatively safer dollar.