The dollar hit its highest level in over six years against the yen and a 22-month high against the euro on Monday as investors bought the greenback on expectations that the monetary policy stances of the U.S. and its peers will continue to drift apart.
The dollar rose to ¥109.67 from ¥109.29 late Friday in New York after touching ¥109.68 — its highest since August 2008.
The euro EURUSD, -0.01% was at $1.2676 from $1.2688 after falling as low as $1.2667 — its lowest since November 2012.
The greenback’s rise came ahead of the releases of key economic data and events later this week, including U.S. jobs data Friday, the Bank of Japan’s tankan survey of business sentiment on Wednesday and the European Central Bank’s policy meeting Thursday.
But “there still remains the heat of the dollar’s strength” across the board, said Toshihiko Sakai, senior manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking, adding that it’s possible that the U.S. currency will challenge ¥110 over the short term.
In its search for a cheaper manufacturing base, Japan is expanding aid and investment into Laos and other Southeast Asia’s frontier markets, many of them traditional allies of Beijing.
Mr. Sakai said the dollar’s strength against the yen is largely driven by its gains against the euro, on expectations for extra steps by the ECB later this week.
Investor appetites for the dollar remained strong enough to help it surpass the ¥110-threshold before the U.S. jobs data on Friday, said Nomura Securities chief FX strategist Yunosuke Ikeda in a note.
The dollar will likely remain trapped around that level as hedge funds are expected to lock in profits. But if the jobs data remain robust, the dollar may go up further. And even with a weak reading, demand from long-term investors seeking to buy the dollar on dips will likely keep it steady against the yen, said Mr. Ikeda.
Among other currency pairs, the British pound GBPUSD, -0.05% fell to $1.6230 from $1.6245. The euro was at EURJPY, +0.29% ¥138.69, compared with ¥138.57.
The WSJ Dollar Index BUXX, +0.25% , a measure of the dollar against a basket of major currencies, was up 0.17% at 77.76.