Dollar Higher Against Euro, Yen, as Fed Rate Rise Expectations Continue

The dollar hit a fresh seven-month high against the euro and a one-week high against the yen during Asia trade Tuesday, indicating investor expectations for an increase U.S. interest rates next month that would bring added strength to the greenback remain intact.

The euro declined to as much as $1.0656 in Tokyo midday, its lowest level since April 16, before rising to $1.0661 around 0450 GMT. That compares with $1.0686 late Monday in New York.

Tokyo-based dealers and analysts said Friday’s terrorist attacks in Paris would make the European Central Bank more inclined to ease its monetary grip when its Governing Council meets Dec. 3, a move making the euro vulnerable to selling pressure.

Against the Japanese currency, the greenback rose up to Y123.40, its highest since Nov. 10, before falling slightly to Y123.38 midday, compared with Y123.19 in New York.

The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.16% at 90.68.

“Risk-off is gone now, as investors saw the U.S. and Europe stocks recovery,” said Akira Moroga, manager of forex products group at Aozora Bank. “The dollar buying is in progress on hopes for (the U.S. Federal Reserve) rate increase,” said Mr. Moroga.

In Tokyo, the Nikkei Stock Average advanced 1.5% midday.

The global financial markets’ response to Friday’s terror attacks in Paris was “only limited and short-lived,” as has been the case after previous terror attacks, said Mizuho Bank chief market economist Daisuke Karakama in a morning note. There had been concerns over the weekend that a pessimistic mood would strengthen the yen, due to the unwinding of yen short positions. But such fears “proved to be groundless,” said Mr. Karakama.

Investors are now focusing U.S. October inflation data later in the day in light of strengthening market expectations for a rate increase by the Fed, when it meets next month.

In other currency pairs, the euro was flat at Y131.53 from Y131.63.

ECB President Mario Draghi spoke Monday morning at a closed-door event in Madrid, though the ECB didn’t publish his remarks. Mr. Draghi’s spokesman said in an email to The Wall Street Journal that Mr. Draghi “discussed economic developments in the euro area. He outlined the ECB’s current monetary policy stance and was keen to listen to views from industry on the real economy.”

Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT

                           Latest       Previous   %Chg    Daily    Daily   %Chg
Dollar Rates                               Close            High      Low  12/31

USD/JPY Japan           123.38-39      123.17-18  +0.17   123.43   123.17  +3.06
EUR/USD Euro            1.0661-64      1.0684-87  -0.22   1.0692   1.0656 -11.87
GBP/USD U.K.            1.5178-80      1.5201-03  -0.15   1.5206   1.5175  -2.56
USD/CHF Switzerland     1.0109-13     1.0097-101  +0.12   1.0116   1.0092  +1.69
USD/CAD Canada          1.3335-40      1.3330-35  +0.04   1.3346   1.3322 +14.77
AUD/USD Australia       0.7088-92      0.7095-99  -0.10   0.7105   0.7082 -13.23
NZD/USD New Zealand     0.6459-65      0.6491-97  -0.49   0.6495   0.6455 -17.10

Euro Rate

EUR/JPY Japan           131.53-57      131.61-65  -0.06   131.81   131.47  -9.24

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