Dollar slips, yen nears 160 as traders weigh Fed and BOJ rate moves

The dollar weakened while the yen hovered near the 160-per-dollar level as traders priced in higher odds of rate hikes from both the Federal Reserve and the Bank of Japan. The dollar index slipped toward about 99.37–99.5 as markets awaited upcoming US data and reacted to hawkish signals from Fed officials, notably Chair Warsh. The yen recovered to roughly 159.81 per dollar after briefly breaking the 160 threshold, supported by pressure from U.S. officials urging Japan to lift rates. Markets increasingly priced in a September Fed rate hike, with probabilities hovering around the 58–60% range as attention turns to jobs and inflation data. Meanwhile, major peers such as the euro and sterling held around $1.16 and $1.355 respectively, with investors weighing geopolitical tensions and oil market movements that can influence risk sentiment. Overall, the narrative centers on diverging policy paths and a cautious tilt toward tighter monetary policy in the near term, keeping the focus on upcoming economic releases.