The dollar is strengthening against the yen, reaching its highest level in 5 years, as traders believe that the Omicron strain will not affect the global economy. This raises confidence that the U.S. Federal Reserve will carry out the planned interest rate increases.
The dollar index against the six major currencies in a basket of currencies rose 0.04% to 96.25.
The dollar rose 0.75% against the yen to 116.18, after reaching 116.34, the highest level since January 11, 2017.
The euro rose 0.68% against the yen to 131.12 and weakened 0.06% against the dollar to $1.129.
The pound rose 0.56% to $1.3550, its highest level since Nov. 10, 2021. The markets expect the BOE to raise interest rates by 0.15% at the two monetary policy meetings in February and March
The dollar was also supported by the fact that the yield on 10-year U.S. government bonds rose further above 1.6% today.
CME Group’s FedWatch tool, which analyzes short-term U.S. interest rate futures, indicates that investors expect the Fed to raise rates by 0.25% at its March monetary policy meeting with a probability of more than 60%. This is also the month in which the Fed will end its QE program.
Investors are looking ahead to Friday’s nonfarm payrolls number. These will provide information on the labor market situation in the United States.