The dollar traded close to a three-month high against the yen on Thursday, underpinned by higher U.S. bond yields and growing expectations that the U.S. Federal Reserve will raise interest rates by the end of the year.
The market is now pricing in a 74-percent chance that the Fed will raise rates at its December meeting, according to CME Group’s FedWatch tool, following a series of hawkish comments from Fed policymakers.
Those expectations have driven the dollar to nine-month highs against a basket of currencies this week, and it was up 0.1 per cent on Thursday at 98.716, just off those highs.
“We’re see a renewed pick-up in Fed rate hike expectations, which will likely intensify going into the November Fed meeting next week,” Credit Agricole’s head of G10 currency research, Valentin Marinov, said.
“We will be looking for an explicit indication in the statement that rates will be going higher in December.”