USD stabilizes with increasing expectations of interest rate hike and optimism about debt ceiling

The dollar held steady on Monday amid rising expectations of a Federal Reserve hike in interest rates, despite news of a debt ceiling agreement that drove some hedge-seekers away from the greenback.

The dollar recorded its highest level in six months against the Japanese currency at 140.91 yen in early Asian trading, before losing some of these gains and trading in the latest trading at 140.39 yen. The dollar is heading for monthly gains of around 3 percent against the yen.

The yen’s new decline against the dollar came on the back of rising US Treasury yields, with increasing bets on US interest rates remaining high for a longer period.

Trading in US Treasury bonds in Asia was halted on Monday due to the Memorial Day holiday in the United States.

UK markets were also closed on Monday due to a holiday.

Against the dollar, the euro rose 0.02 percent to $1.0735, while the pound sterling fell 0.01 percent to $1.23495.

Financial markets now expect the Federal Reserve to raise interest rates by 62 percent by 25 basis points in June, compared to an expected increase of about 26 percent a week ago, according to CME’s Fed Watch data.