Yen Holds Near 160 as Bessent Pressures BOJ, Bond Selloff Deepens

The yen traded near 160 per dollar on Tuesday, holding its ground after US Treasury Secretary Scott Bessent said he expects Japanese authorities to act in a way that strengthens the currency. His comments, made during a G20 finance leaders' gathering, added to market expectations that the Bank of Japan will raise rates this month.

Bessent told CNBC that he has information the market lacks and believes the Japanese government and central bank will take steps leading to a firmer yen. Japanese Finance Minister Satsuki Katayama said she met with Bessent and both agreed that orderly yen movements are vital for global market stability.

Traders now price in a 73% chance of a BOJ hike in September. However, analysts caution that a single move may not be enough. Charu Chanana of Saxo noted that with US yields elevated and oil prices rising, the yen likely needs a more hawkish BOJ path beyond September to sustainably move away from 160.

The currency has weakened past 160 in the previous two sessions, surrendering most of the gains from a rare joint US-Japan intervention in late July that pulled it from 40-year lows near 164.

Meanwhile, renewed Gulf attacks have unsettled markets. US President Donald Trump threatened further strikes against Iran after the first direct exchange in a month, pushing Brent crude above $91 a barrel. The 10-year Treasury yield hit its highest since January 2025, while the 10-year Japanese government bond yield touched 3% for the first time in three decades.

The dollar index edged up 0.1% to 99.514, though the greenback remained subdued after Friday's sharp rise. The euro slipped 0.1% to $1.16045, while sterling fetched $1.35424. The Australian dollar traded at $0.7168 and the New Zealand dollar at $0.5907.

Investors are also weighing the possibility of a Federal Reserve rate hike in September. Fed Chairman Kevin Warsh, in his Jackson Hole debut, said the Fed will "have work to do" if inflation does not cool. Markets now see a 65% chance of a hike this month, up from 41% a week earlier.

Carol Kong of Commonwealth Bank of Australia noted that higher oil prices and Treasury yields have failed to support the dollar, suggesting markets are reassessing whether Warsh's hawkish stance can restore Fed credibility. Rising BOJ hike expectations also added pressure on the greenback.

Attention now turns to a batch of economic data due later this week that could shape expectations for further Fed tightening.