Dollar scales 6-month peak against yen on US rate expectations

The dollar touched a six-month high against the yen on Tuesday as expectations grew that U.S. rates will remain higher for longer and as the debt ceiling impasse kept risk sentiment fragile.

Among a slew of Federal Reserve heavyweights who spoke on Monday, some hinted that the central bank still has more to go in tightening monetary policy.

Minneapolis Fed President Neel Kashkari said that U.S. rates may have to go “north of 6%” for inflation to return to the Fed’s 2% target, while St. Louis Fed President James Bullard said the central bank may still need to raise another half-point this year.

Against the Japanese yen, the greenback rose to a near six-month peak of 138.88 in Asia trade, reflecting the stark contrast between a still-hawkish Fed and an ultra-dovish Bank of Japan. The dollar was last 0.11% lower at 138.44 yen.

“Markets are pricing for higher rates for longer by the Fed,” said Tina Teng, market analyst at CMC Markets. “U.S. inflation is still way above the target … and near-term, the economy is running resilient.

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