Investing.com - The dollar rose against the yen on Tuesday, boosted by expectations that the Federal Reserve will continue to scale back stimulus measures at next week’s policy meeting.
USD/JPY rose to highs of 104.75, the strongest since January 16 and was last up 0.45% to 104.64.
Demand for the dollar was underpinned by expectations for a reduction to the Fed’s quantitative easing program at the outcome of its next policy meeting on January 29 to USD65 billion from the current USD75 billion.
Demand for the safe haven yen was also hit after China’s central bank moved to inject liquidity into the financial system overnight, easing concerns over a possible credit crunch.
EUR/USD touched lows of 1.3527, and was last down 0.09% to 1.3540 ahead of the closely watched ZEW index of German economic sentiment.
The dollar was steady against the pound, with GBP/USD dipping 0.01% to 1.6425, and was higher against the Swiss franc, with USD/CHF up 0.29% to 0.9125.
The Australian dollar was trading close to three-and-a-half year lows, with AUD/USD down 0.31% to 0.8783. Meanwhile, NZD/USD slipped 0.15% to trade at 0.8312, after rising as high as 0.8340 earlier.
The kiwi initially posted gains after data released on Tuesday showed that the country’s inflation rate rose 0.1% in the fourth quarter and 1.6% on a year-over-year basis. Market expectations were for a 0.1% drop on the quarter and gain of 1.5% on the year.
Elsewhere, USD/CAD advanced 0.42% to 1.0994, the highest level since September 2009. The loonie, as the Canadian dollar is also known, remained under pressure amid expectations that the Bank of Canada will stick to its dovish stance on rates at Wednesday’s policy meeting.
The U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.20% to 81.40.