The U.S. dollar extended its gains on Friday as rising U.S. Treasury yields strengthened the currency, keeping it near a 40-year high against the Japanese yen amid mounting inflation risks driven by higher oil prices and renewed global trade tensions.
Sterling hovered near a three-week low at $1.3310 during Asian trading after falling nearly 0.5% against the dollar in the previous session.
The euro also weakened to $1.1381, although expectations of a possible interest rate hike by the European Central Bank provided some support. The dollar index remained close to a three-week high at 101.41 against a basket of major currencies.
The latest rally in the dollar came as Brent crude climbed back above $100 a barrel after Houthi forces attacked two Saudi oil tankers in the Red Sea, extending the Middle East conflict to another strategic maritime route.
U.S. President Donald Trump vowed to impose “severe military punishment” on Iran and its Houthi allies.
Inflation concerns also intensified after the Trump administration announced new tariffs of 10% and 12.5% on goods from 60 trading partners, citing what it described as weak enforcement of forced labor bans, alongside the expiration of a temporary global 10% tariff.
Renewed tensions in the Middle East and escalating trade disputes pushed U.S. Treasury yields higher, with the benchmark 10-year yield climbing above 4.7%, its highest level in more than 18 months, on concerns that inflationary pressures could intensify.
The stronger dollar continued to weigh on the yen, which remained near a 40-year low at 163.80 per dollar.
On Thursday, the U.S. Treasury warned against excessive volatility in the yen’s exchange rate, while calling on the Bank of Japan to pursue larger interest rate increases.
The Australian dollar rose 0.14% to US$0.6978 after falling more than 0.4% in the previous session. The New Zealand dollar gained 0.1% to US$0.5778, following a 0.8% decline on Thursday.
Reuters
