By Kevin Buckland
TOKYO (Reuters) – The dollar traded near a 2 1/2-week high to major peers on Monday as quickening inflation in the United States boosted the case for earlier Federal Reserve interest rate hikes.
It approached a 1 1/2-week top to the yen after the safe-haven Japanese currency weakened as a strong showing for the ruling party in weekend elections reduced political uncertainty.
The dollar index, which measures the greenback against six rivals, was little changed at 94.166, hovering close to Friday’s peak of 94.302, a level not seen since Oct. 13.
The U.S. currency bought 114.175 yen, gaining 0.13% from the end of last week. Above 114.41 would be the strongest since Oct. 20, the day it hit a multi-year high of 114.695.
New Japanese Prime Minister Fumio Kishida’s ruling Liberal Democratic Party defied expectations and held its strong majority in Sunday’s parliamentary election, solidifying his position in a fractious party and allowing him to ramp up stimulus.
“The reduction in political uncertainty is playing out with slight yen weakness this morning,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo.
“The bigger driver of dollar-yen direction going ahead remains the Fed.”
Monetary policy in the United States and elsewhere is in sharp focus this week, with the Federal Open Market Committee widely expected to announce a tapering of stimulus on Tuesday.
A 4.4% surge in the government’s index of core personal consumption expenditures – the Fed’s…
