Dollar near two-week high as Warsh boosts rate-hike bets; yen slips past 160

The U.S. dollar reached near a two-week high on Monday as traders grew optimistic about a possible interest rate increase following hawkish remarks from Federal Reserve Chair Kevin Warsh. Meanwhile, the Japanese yen slipped beneath the 160-dollar mark. Federal Reserve Chairman Kevin Warsh stated on Friday that the central bank may need to continue tightening monetary policy if they do not see confidence that inflation will drop to 2% by year-end.

This statement boosted expectations of a September rate hike, raising the probability to 57%. Warsh's defense of the 2% inflation target helped ease concerns about currency debasement and restore confidence in the Fed. Investors are now closely watching upcoming U.S. economic data, including the nonfarm payrolls report and consumer inflation figures.

The euro gained slightly against the dollar, while the British pound remained unchanged. Both currencies are on track for their second consecutive monthly gains. The dollar index, which tracks the U.S. currency against six major peers, slipped slightly to 99.6, after a 0.6% increase on Friday to its highest level in over a month.