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

The U.S. dollar reached a near two-week high on Monday, as markets grew more confident in a potential Federal Reserve rate hike following hawkish remarks from Chair Kevin Warsh. Meanwhile, the Japanese yen slipped below the psychologically significant 160 mark against the dollar. Warsh, in his strongest signals yet, suggested that further tightening might be necessary to bring inflation down to 2%, boosting bets on a September rate hike to 57%.

This shift in focus from inflation targets to economic fundamentals bolstered the dollar's credibility, easing concerns about currency debasement. Investors now turn their attention to upcoming U.S. data, especially Friday's nonfarm payrolls report and next week's consumer inflation figures. The euro edged up marginally to $1.1591, while the British pound held steady at $1.3539.

The dollar index, which tracks the U.S. currency against six major counterparts, edged down to 99.6 after climbing 0.6% on Friday to its highest level since late August. Higher oil prices, notably after U.S. forces struck Iran's Larak Island, also bolstered dollar demand. Meanwhile, the yen's weakness is a notable concern, with the dollar's rise adding pressure on the Japanese currency.