Yen at seven-month high, oil tops $100 as Middle East tensions roil markets
Yen hits 7-month high, oil breaks $100 on Middle East strikes, BOJ hike bets and Fed uncertainty.
The Japanese yen strengthened to a seven-month high against the dollar on Wednesday, while Brent crude futures climbed above $100 a barrel for the first time since late July, as escalating Middle East hostilities rattled global markets.
Yemen's Houthi rebels struck several Saudi Arabian cities, and US forces hit Iranian oil tankers. Tehran also attacked a US base in Jordan. The developments pushed Brent up as much as 2.3%, sharpening the focus on how the Federal Reserve might react to higher energy prices, especially after strong US payroll data revived expectations of a rate increase next week.
The dollar index hovered near its lowest in almost two weeks. The euro edged up 0.18% to $1.1641 ahead of a widely expected European Central Bank rate decision on Thursday. Analysts at OCBC noted that higher oil and yields may limit dollar downside, but a clearer direction would likely depend on Friday's US inflation report.
The yen's 4% rally this month has been broad-based, extending gains against the euro, sterling, and popular carry-trade currencies like the Mexican peso and Turkish lira. Traders widely expect the Bank of Japan to raise rates by 25 basis points at its September 17-18 meeting, but the currency's momentum may hinge on whether Governor Kazuo Ueda delivers hawkish guidance.
US Treasury Secretary Scott Bessent challenged traders to bet against the yen, referencing recent joint US-Japan intervention to support the currency. XTB research director Kathleen Brooks said Bessent's comments reflect Washington's determination to protect its Treasury market and bolster the yen.
The Canadian dollar shrugged off new US import bans on Canadian goods, including alcohol and dairy products, holding near three-week lows. China's yuan stayed close to a 3-1/2-year peak, supported by better-than-expected inflation data and faster export growth.