Dollar gains on yen

The dollar was testing a five-week high against its major peers on Monday, with particular gains against the rate-sensitive Japanese yen as investor speculation that the Federal Reserve is going to keep monetary policy on hold for longer pushed U.S. yields higher.

These expectations will be challenged or highlighted by the main event of the week – the release of U.S. consumer price data – which appeared during trading on Monday.

The dollar rose 1.02% to 132.77 yen, having touched 132.92 last week, the dollar’s highest against the yen since January.

The euro hit a one-month low of $1.0657 in Asian trade but was last at $1.0694, up 0.153%. The British pound was up 0.32% at $1.2097, not far from a one-month low of $1.1962.

That left the dollar index at 103.56, steady on the day after approaching last week’s peak of 103.92.

Higher U.S. income was the main driver of the soft yen.

The benchmark U.S. Treasury yield hit a fresh six-week high of 3.756%. Meanwhile, the two-year yield hit its highest since November at 4.544%.

Other currencies

The Japanese currency fell sharply to a 32-year low of $151.94 as U.S. rates rose while Japanese rates remained zero.

It has regained ground this year as U.S. rates looked like they were nearing record highs, and the Bank of Japan was expected to stay away from its hawkish stance. However, both now look set to come later than expected.

Multiple sources said a former Bank of Japan board member would become the next governor on Friday. Board members said it was appropriate for the BOJ to maintain its current easy policy.

A much stronger job data release in early February suggests the economy is performing strongly.

Money markets are positioning for a peak in U.S. interest rates just below 5.23% around July, compared to the current target rate of 4.52-4.76%, but have largely pulled back on expectations of a major rate cut later in the year.

The Swiss franc strengthened. The dollar fell to 0.9214 Swiss francs.