Investing.com - The dollar rallied to one-month highs against the weaker yen on Monday after remarks by Federal Reserve Chair Janet Yellen fueled expectations that U.S. interest rates could rise in the coming months.
USD/JPY advanced 0.9% to 111.35, the highest level since April 28.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.16% at 95.87.
U.S. central bank chief Janet Yellen said Friday it would be appropriate for the Fed to raise rates “gradually and cautiously” in the coming months if the economy and the labor market continue to pick up as expected.
The Fed hiked interest rates in December for the first time in almost a decade.
Higher rates are positive for the dollar because they make the U.S. currency more attractive to yield-seeking investors.
The dollar had already risen ahead of Yellen’s remarks after data showing that the slowdown in U.S. first quarter growth was not as sharp as initially estimated.
The Commerce Department reported Friday that gross domestic product rose at an annualized rate of 0.8% in the three months to March, up from the initial estimate of 0.5%.
The dollar has strengthened broadly in recent weeks as upbeat economic reports and comments by Fed officials suggested that the U.S. central bank could raise rates as soon as its June meeting.
Demand for the safe haven yen was hit by reports that Japanese Prime Minister Shinzo Abe is planning to delay a planned sales tax increase for a second time, after a similar tax increase in April 2014 derailed an economic recovery.
The yen was also sharply lower against the euro, with EUR/JPY advancing 0.99% to 123.84.
EUR/USD edged up to 1.1125, not far from the two-and-a-half month trough of 1.1098 hit overnight.
Trade volumes looked likely to remain light on Monday with financial markets in the U.K. shut for a public holiday and U.S. markets closed for Memorial Day.