Dollar Scores Five-Year High versus Yen

A climb in U.S. Treasury yields on anticipations for a Fed rate hike this year have supported the dollar, with those foreseeing at most minuscule a 25-basis-point hike at the March conference of the central bank’s policy-setting committee completing 60%, the CME FedWatch Tool found.

Yields on U.S. 5-year notes, sensitive to rate hike anticipations, reached the highest level after February 2020. Yields on U.S. 2-year notes, which also reflect the market’s view on interest rates, edged lower behind, touching a 22-month high on Monday.

The dollar index increased 0.06%, with the euro under 0.05% to $1.1288.

The Japanese yen cut 0.65% versus the dollar at 116.08 per dollar after the dollar gained a high of 116.34 versus the yen, its highest level after Jan. 11, 2017.

The U.S. Central Bank Rising Interest Rates

Minneapolis Federal Reserve Bank President Neel Kashkari, understood as a dove stated he expects the U.S. central bank to need to raise interest rates two times this year to address persistently high inflation, switching his long-held view that rates will need to stay at zero until at least 2024.

On Monday, the U.S. Food and Drug Administration approved using a third dose of the Pfizer (NYSE: PFE) and BioNTech coronavirus vaccine for children ages 12 to 1. Moreover, it capped the interval for a booster shot eligibility to five months from six.

Studies have indicated the risk of hospitalization is lower. Hence, investors have come to consider Omicron as potentially less disruptive to the global economy than prior variants of the coronavirus.

Sterling was last trading at $1.3531, higher 0.45% on the day. Afterward, it hit a two-month high of $1.3557 against the dollar and a near two-year high versus the euro, buoyed by anticipations the Bank of England will increase interest rates the following month.