The US dollar hit a fresh two-month high amid expectations of further FRB rate hikes. The yen is once again facing intervention risk, while declining liquidity in the Japanese market is also having an impact.
Hawkish comments from FRB officials strengthened expectations that the FRB will raise interest rates further in the near term, pushing the US dollar to a two-month high. The dollar strengthened despite falling oil prices, putting further downward pressure on the yen.
The yen fell to around ¥157.63 per dollar as the dollar advanced, once again bringing the risk of intervention by Tokyo into focus. Market participants believe that the difference between the FRB's pace of rate hikes and the Bank of Japan's stance will affect foreign exchange markets.
According to CME FedWatch, investors have priced in a 53.1% probability of a rate hike at the October meeting and an 89.5% probability in December, making the FRB's tightening outlook the central focus of the market. The USD index rose to 100.70.
Market analysts continue to point out that the dollar outlook remains uncertain, depending on developments in the Middle East and oil prices. The impact of the medium- to long-term rate-hike path may also be influenced by developments at other major central banks.