Dollar hits seven week high against the yen as Fed meeting on US interest rates eyed

The US dollar rose to a more than seven-week high against the yen on Monday, supported by a rise in US Treasury yields, as traders waited on an impending Federal Reserve meeting for clues on whether US interest rates could rise again by year-end.

The dollar was up 0.51 per cent against the Japanese currency at 111.4 yen.

“The dollar-yen is the most US interest rate-sensitive currency pair right now. With US yields creeping up, the dollar-yen is creeping up,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.

US Treasury yields rose on Monday as investors prepared for a potentially more hawkish Federal Reserve at its two-day policy meeting this week, after the Bank of England surprised investors last week with talk of a possible rate hike.

The US central bank is widely expected to announce at the conclusion of its meeting on Wednesday that it will begin paring its massive portfolio of Treasuries and mortgage-backed securities, with the reductions likely to start this year.

“The primary reason US yields are creeping up is after thinking about it clearly the market has decided that the Fed is unlikely to change the December 2017 dot – still saying they expect one more rate hike in 2017,” BMO’s Anderson said.