Dollar gains on yen as Fed’s inflation shift boosts U.S. yields

The dollar hit a two-week peak on the yen on Friday, lifted by U.S. bond yields, which rose on the Fed’s aggressive new strategy to increase employment and boost inflation.

Investors are also awaiting Japanese Prime Minister Shinzo Abe’s briefing later in the day as worries about his health raised concerns about economic relations with the United States.

The yen fell 0.26% to 106.695 on the dollar, its lowest level since Aug. 14. The 10-year U.S. yields climbed to 0.7700% in Asian trade. 

Fed Chair Jerome Powell said that the central bank will seek to hit 2% inflation on average to ensure economic recovery and job creation.

Following Powell’s speech, the dollar fell sharply against the euro and the yen but bounced as longer-term U.S. Treasury yields rose to their highest levels in months.

The dollar index dropped 0.23% to 92.817. The euro stood at $1.18565, after nearly falling to last week’s low of $1.17545. 

Traders now turn their focus to Prime Minister Abe’s news conference as his recent visits to the hospitals fanned speculations that he will not be able to finish his term.

Elsewhere, the offshore yuan stood at $6.8724. The pound traded at 1.3242 against the dollar. The Aussie climbed 0.37% to $0.72860, while the kiwi hiked 0.36% to $0.6662.