Dollar Charts New Highs against Yen, Euro

The dollar was higher against its rivals on Tuesday, due to the diverging monetary policies and economic conditions of the U.S. and its peers, pushing up the greenback to fresh, six-year high against yen and pulling the euro down to a 14-month low against the U.S. currency.

The dollar USDJPY, +0.26% was at ¥106.28 compared with ¥106.02 late Monday in New York after briefly touching ¥106.34, its highest since October 2008.

The euro EURUSD, -0.21% was at $1.2871 from $1.2894 after falling to $1.2867, its lowest since July 2013. The U.K. pound GBPUSD, +0.07% was $1.6068 against $1.6194, after hitting $1.6064, its weakest since November 2013.

The greenback was gaining traction in midday trade with dollar-buying across the board against rival currencies, said a Japanese bank dealer. Investors who had earlier missed the chance to buy dollars, were buying now, he said.

2014 has been an unexpectedly strong year for municipal bonds. How should investors navigate this robust market? Peter Hayes, BlackRock’s head of municipal bonds, joins Paul Vigna on MoneyBeat with the answer.

There were some solid reasons for the dollar buying. The economic recovery appears to be gaining momentum in the U.S., an important factor behind the Federal Reserve’s plan to raise interest rates as early as in 2015. By contrast, there were factors weighing against the currencies of other major economies, such as anemic economic data in Japan, the possibility of more monetary easing in the eurozone, and a surprising surge in support for Scottish independence in the U.K.

Some pointed to a research report released Monday by the Federal Reserve Bank of San Francisco, which fueled expectations for an earlier rate hike by the Fed.

Ahead of next week’s FOMC policy meeting, which will be scrutinized for clues on the timing of the decision to raise interest rates, the report said that evidence based on surveys, market expectations, and models shows that the public seems to expect a more accommodative policy than do the FOMC participants.

“There is a vague feeling about higher U.S. interest rates but no certainty,” said FPG Securities Chief Executive Koji Fukaya. “As the buying is led mainly by speculative moves, I think the pace of gain is a bit fast.”

With a lack of upcoming fresh cues other than U.S. retail sales Friday, the market is testing its upside in the wake of the Fed report, making it vulnerable to profit-taking later this week, Mr. Fukaya said. He expects the dollar to move in a range between ¥105.20 and ¥106.70.

In other currency trade, the euro EURJPY, +0.06% was at ¥136.83 from ¥136.72.

The WSJ Dollar Index BUXX, +0.19% a measure of the dollar against a basket of major currencies, was up 0.20% at 76.10

Source: MarketWatch