TOKYO - The US dollar stayed within striking distance of a two-year high against the yen on Monday on prospects for higher US interest rates.
The US currency has found solid support in recent weeks from vows from a parade of Federal Reserve officials to keep US inflationary pressures at
bay, suggesting the central bank won't stop raising rates any time soon.
Traders said that has been helpful to Japanese investors looking for a home for their cash amid very low yields in Japan.
"As long as US rates are rising you've got this double-whammy effect of spare cash looking for yield and yield is there (in the US)," said Luke Waddington, head of forex trade at Royal Bank of Scotland in Tokyo.
"That's why dollar/yen is totally supported, and people underestimate the fact that this is probably going to be a theme for quite a few months to come."
The Fed has raised its benchmark interest rate 11 times since June 2004, taking it to 3.75 per cent. Many expect it to raise rates twice more this year to 4.25 per cent and probably more next year.
- REUTERS
