Dollar logs best rally versus yen since 1988

toronto — The dollar posted its biggest two-week rally against the yen since 1988 amid bets that Donald Trump’s administration will pursue fiscal stimulus, boosting the US economy and triggering monetary tightening.

The greenback touched the strongest level against the yen since May and appreciated the past 10 trading sessions versus the euro, an unprecedented streak. Traders see an interest-rate increase next month by the Federal Reserve as a virtual lock, enhancing the appeal of dollar holdings.

The US currency’s appreciation over the past two weeks came as Treasury yields surged on bets the Republican president-elect’s spending pledges will spark faster inflation. Fed chair Janet Yellen suggested on Thursday the central bank remained on course to tighten policy next month.

“It’s right to assume that if we get sizeable fiscal stimulus, it is and should be dollar-positive,” said Daragh Maher, head of US currency strategy in New York at HSBC Holdings. “That’s the fixation and you don’t fight it.”

The US currency added 7.6 per cent over the past two weeks to 110.91 yen, and reached the highest since May. The dollar’s back-to-back weekly gains versus the euro drove it to $1.0588 per euro as it touched the strongest since December.

The Bloomberg Dollar Spot Index, which tracks the US currency against 10 major peers, reached the highest since February. It’s now up 1.5 per cent this year, after accumulating losses for most of 2016.

Yellen gave the dollar a boost on Thursday as she told Congress a rate increase “could well become appropriate relatively soon.” Traders put the chances of a Fed rate increase next month at 100 per cent, compared with about 70 per cent at the beginning of the month.

7.6% gains recorded by the US currency over the past two weeks