TOKYO The euro jumped to a more than three-week peak against the dollar on Monday, and sterling went to the highest this month as European Central Bank officials pushed the case for more aggressive monetary tightening.
The greenback was not far from a two-week low against a basket of peers ahead of key U.S. inflation data this week that could give the Federal Reserve room to slow the pace of rate hikes at its Sept. 21 policy meeting.
The euro went up to $1.0130 early in the Asian day before trading 0.32 per cent stronger than Friday at $1.0079.
The pound was at $1.1681, and was last 0.23 per cent higher at $1.1610.
According to sources, ECB policymakers believe that there is a rising risk that they will have to raise their key interest rate to 2 per cent or more to curb record inflation in the euro zone.
In an interview with German radio, Joachim Nagel said that further clear steps must be taken if the picture for consumer prices doesn't change. The dollar index, which measures the currency against six major counterparts, was not changed at 108.78, holding close to those levels after falling back from a two-decade peak of 110.79 reached on Wednesday. It dipped to the lowest since Aug. 30 at 108.35 in the previous session.
As Fed officials continued to hawkish rhetoric on Friday, investors are wary ahead of Tuesday's U.S. CPI report, even as the last day was the last day for such comments before a black-out period leading up to the Federal Open Market Committee's deliberations.
At our next meeting, Fed Governor Christopher Waller said he supports a significant increase, while St. Louis Fed President James Bullard reiterated his call for a hike of 75 basis points.
The need for the FOMC to keep raising interest rates until there is evidence that inflation is falling, Commonwealth Bank of Australia strategist Joseph Capurso wrote in a client note.
He said that despite the CPI report's findings, the FOMC has much more work to do, meaning more upside for the dollar over the short and medium term.
The dollar was up 0.36 per cent to 143.215 against the rate sensitive yen, going back toward a 24 year zenith at 144.99 from Wednesday.
The benchmark U.S. 10 year Treasury yield, which the currency pair usually tracks closely, hovered around 3.315 per cent in Tokyo trading, not far from last week's nearly three-month high of 3.365 per cent.
Japanese officials said over the weekend that the administration must take steps as needed to counter excessive yen declines, with a senior government spokesman saying in a local television interview that the administration must take measures as needed to counter excessive yen declines.
Analysts doubt that intervention would work without the backing of the Fed and other central banks, considering that the Bank of Japan alone is among developed markets that is pressing on with stimulus.
A coordinated effort is needed and with major central banks fighting inflation through tighter policy, global official support for JPY seems unlikely, according to Rodrigo Catril, a strategist at National Australia Bank.
If the BOJ wants to stop JPY's decline, then they need to make changes to their ultra-easy policy, he added. Pressure is building. The Australian dollar was slipping 0.23 per cent to $0.6831, while New Zealand's kiwi fell 0.07 per cent to $0.6099.
After moving up to $22,350 for the first time since Aug. 19, the cryptocurrencies began to find its footing after its bounce from a nearly three month low of $18,540 last week.