The US dollar advanced on Tuesday as renewed attacks in the Gulf sparked a global bond selloff and revived inflation concerns. The Japanese yen weakened beyond 160 to the dollar, even as pressure mounted on the Bank of Japan to raise interest rates.
Gulf Escalation Lifts Oil and Bond Yields
Fresh attacks in the Gulf pushed oil prices higher and intensified fears that rising energy costs could feed into broader inflation. The escalation followed the first direct exchange of attacks in a month, according to a Reuters summary.
Those inflation worries contributed to a steep selloff in government bonds, driving yields higher. Overall market sentiment remained fragile as investors assessed the risk of sustained price pressures.
Dollar Gains on Fed Expectations
The dollar rose as market participants reassessed the outlook for US monetary policy. Bets on a Federal Reserve rate increase in September strengthened, providing additional support for the greenback.
With inflation concerns back in focus, traders began pricing in a more aggressive Fed stance. The renewed bond selloff added further momentum to the dollar’s advance.
Yen Breaks Key Level Despite BOJ Pressure
The Japanese yen slipped past the closely watched 160-per-dollar threshold, even as calls intensified for the Bank of Japan to tighten monetary policy. Comments from US Treasury Secretary Bessent regarding the yen added to the pressure on the Japanese central bank to act.
The yen’s move beyond 160 keeps the risk of currency intervention alive. Markets will now monitor signals from the Bank of Japan and any further official comments for clues on the next policy steps.
