Dollar Gains on Fed Rate-Hike Bets as Yen and Asian Currencies Fluctuate

Market participants have largely priced in a 25-basis-point Fed increase, which should provide a modest boost to the dollar, according to currency strategists. The greenback rose alongside yields, reaching its strongest level against the yen and New Zealand dollar, with the kiwi dropping to US$0.5749 and the yen sliding to 155.43 per dollar. The euro and sterling hovered near recent lows, while the Australian dollar steadied at US$0.7126.

Analysts warn that if the Fed holds rates steady, the dollar could tumble by more than 1%. In Asia, the yen's rally is supported by expectations of a Bank of Japan hike and joint intervention, with traders seeing an 80% chance of a BOJ move. South Korea's won and China's yuan have also shown notable strength amid capital inflows and policy differentials.