By Anirban Nag
LONDON (Reuters) - The dollar advanced to a three-month high against the yen on Friday, on track for monthly gains against most major currencies as investors waited for U.S. third-quarter growth data later in the day.
A solid number would give the Federal Reserve an opportunity to upgrade the economic assessment in the November statement and boost prospects for a December rate hike. It could also help reassure stock markets, which would be supportive of the dollar against the safe-haven yen, traders said.
A disappointing result, however, could trigger a fall in the dollar, a scenario that played out in late July when U.S. second-quarter gross domestic product data came in weak.
The median forecast in a Reuters poll is for the U.S. advance third-quarter GDP data to show growth of 2.5 percent, up from 1.4 percent in the previous quarter.
"We expect an annualized 2.9 percent quarter-on-quarter growth," said Antje Praefcke, currency strategist at Commerzbank (DE:CBKG), adding that positive trade data issued on Wednesday had raised the chances of a better-than-expected outcome.
"That would come as a surprise to the market and may cause the dollar to appreciate."
The dollar rose 0.1 percent in early London trade to 105.42 yen
U.S. interest rate futures are implying a more than 75 percent chance of the Fed raising interest rates by December, according to the CME Group's FedWatch tool.
A rise in U.S. bond yields has helped bolster the dollar in recent weeks, the greenback having risen 3.7 percent against the yen so far this month, its biggest monthly gain since May.
The euro
"Any slippage (in inflation) may raise questions over an already feeble euro zone inflation outlook," said Viraj Patel, currency strategist at ING. "Expect euro/dollar to come under pressure from a robust U.S. GDP print, with a weekly close below $1.0850 confirmation of the short-term bearish bias."
(additional reporting by Masayuki Kitano; Editing by Kevin Liffey)