The Federal Reserve will meet next week. It is expected to raise interest rates in March, for the first time since the start of the coronavirus pandemic, with investors forecasting four hikes in total during 2022.
As investors brace for the possibility of the Fed being tougher than expected, bond yields soared. That of two-year paper – which follows expectations of short-term rates – exceeded 1% for the first time since February 2020.
The 10-year US debt yield also hit a two-year high at 1.856% in early morning trading.
The euro hit a one-week low of $1.1350 and then fell 0.5% to $1.1351.
The yen eased after the Bank of Japan said it will maintain its ultra-loose monetary policy as global peers move toward exiting crisis-time policies.
In midday trading in New York, the US currency was stable at 114.55 yen, after hitting a high of 115.06 overnight.