Dollar set for best week in two months, weak yen captures Tokyo's attention

The US dollar held near a 19-month high on Friday, November 13, and was on course for its strongest weekly performance in two months, according to a CNBC report. The move was driven by rising bets that the Federal Reserve could deliver a larger interest-rate increase. Those bets pushed US yields higher and the Japanese yen back near the 160-per-dollar mark, a level that has put traders on alert for intervention by Tokyo.

The dollar index, which measures the greenback against a basket of currencies, stood at 103.21, near its highest level since April 2025. For the week, the dollar was set to gain 0.9%, its largest weekly rise since September.

The rally in the dollar followed a sharp move in US government bond yields. Two-year Treasury yields had risen around 34 basis points so far this week to about 4.86%, which would be their biggest weekly jump since September 2024. Higher US yields tend to make the dollar more attractive relative to currencies with lower returns, and that dynamic was visible across the major pairs this week.

The catalyst was a series of comments from Fed officials. They warned this week that US inflation remains stubbornly elevated, and some signalled openness to a 50-basis-point rate increase if price pressures fail to ease. According to the CME FedWatch tool, traders were pricing in roughly a 12% chance of such a hike next month. A week earlier that probability was 0%.

The yen was the most closely watched currency. It was steady at 159.99 per dollar, around its weakest level since early September. It had lost about 1% over the week, on track for its biggest weekly loss since September. Tokyo warned it would respond to excessive moves in the currency. Market participants remember the last episode. Japan spent 15.4 trillion yen, about $96.5 billion, to support the currency after it sank to a four-decade low of 163.99 per dollar in late July. In the Tokyo morning session, a separate market report showed the dollar-yen pair moving in a narrow range around 159.80 to 159.92 yen, with traders balancing caution about possible official action against the pull of US rate expectations.

The euro was also under pressure. It was unchanged at $1.1053 on the day, after it touched its lowest level against the dollar since April 2025 during the week. Monex's Rees said the euro should stay in a $1.10 to $1.12 range over the next couple of months. He added that a cold winter in Europe could push it below $1.10. Against the Swiss franc, the dollar was down 0.3% at 0.838, hovering near a one-month high.

The story matters for currency markets because it shows how closely exchange rates are tied to expectations for US monetary policy. When inflation concerns raise the odds of tighter Fed policy, US yields tend to rise, and that has fed through to the dollar's strength against the yen and the euro. The yen's position near 160 also keeps attention on Japan's finance authorities, who have shown before that they are willing to act in the currency market.

The expectations described in the report are market pricing, not certainties. Probabilities such as the 12% FedWatch reading change with each new data release and each Fed comment. This article is a summary of market news and not investment advice.

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