The dollar hit a one-month high against the yen on Monday following comments by Federal Reserve Chair Janet Yellen that the prospects of a near-term U.S. interest rate hike are greater than anticipated until now.
Political developments in Tokyo have also added to supporting the dollar against the yen with Japanese Prime Minister Shinzo Abe’s announcement that he would delay a sales tax hike scheduled for next April by two and a half years.
Yellen said on Friday that the Fed should raise interest rates "in the coming months" if economic growth picks up and the labor market continues to improve.
The endorsement was just what the currency market needed to push the already-bullish dollar even higher after a recent wave of upbeat U.S. economic indicators and comments from top Fed officials pointed to a near-term tightening.
The greenback wavered above 111.00 yen for the first time since late April, reaching 111.03 yen at one point, and was last up 0.5 percent at 110.97 yen.
The euro touched a 2-1/2 month low of $1.1097 on Monday and last traded at $1.1104, down 0.1 percent. The yen fell broadly, with the euro gaining 0.6 percent to 123.20 yen and the Australian dollar rising 0.5 percent to 79.52 yen.
Asian Stocks Drop
Asian shares slipped with MSCI's broadest index of Asia-Pacific shares outside Japan falling 0.2 percent. Japan's Nikkei stock index added 0.9 percent.
According to Michiro Naito, executive director at equity derivatives and quantitative strategies at JPMorgan, "The market is scared of 'negative surprises," adding that investors are still hesitant to take large positions until after the rate hike has been decided.