The dollar climbed on Wednesday, nearing a 3 1/2-month high against the yen, as investors focused on a policy decision from the U.S. Federal Reserve later in the day as well as any progress on President Donald Trump’s tax reform plans.
The U.S. central bank is expected to leave interest rates unchanged at the end of its meeting later in the day. Investors will be watching for confirmation the Fed will resume raising rates next month and the timing of any moves in 2018, but they do not expect the decision to produce a large market reaction.
Markets will also be watching other developments in Washington, where later on Wednesday Republican lawmakers may introduce a bill to cut taxes and the Treasury Department will release its refunding plans.
The dollar climbed as much as 0.4 percent to 114.06 yen , close to last week’s high of 114.45 yen, tracking U.S. Treasury yields higher.
“As tax reform expectations continue to rise – which we expect them to over the next month – that should be consistent with U.S. yields continuing to rise and dollar/yen pushing higher,” said Sam Lynton-Brown, a currency strategist at BNP Paribas in London.
“We target a move to a 115 to 116 (yen) range in the near term,” he said.
The dollar index, which tracks the U.S. currency against a basket of six major rivals, added 0.1 percent to 94.680, though it remained shy of Friday’s three-month high of 95.150.
The euro edged down to $1.1642.
Strategists said investors would be eyeing ADP U.S. jobs data later in the day, before Friday’s all-important non-farm payrolls report.
Investors will also be searching for clues on who might be the next Fed chair. President Donald Trump is expected to announce his choice on Thursday, with news reports tipping Fed Governor Jerome Powell as likely to be nominated to take over when Janet Yellen’s term expires in February.
The New Zealand dollar was the biggest mover among major currencies, rising as much as 1.2 percent to a one-week high of $0.6931 after data showed the country’s jobless rate had sunk to a nine-year low of 4.6 percent.
The kiwi had come under pressure in recent weeks on fears of the new Labour-led coalition government’s left-leaning policies, including a clampdown on foreign investment and migration.
“The kiwi was oversold on fiscal uncertainty and about what the Labour-led government would be enacting, so the market was short, and prone to squeezes,” said Sue Trinh, head of Asia FX strategy at RBC Capital Markets in Hong Kong.
Bitcoin, which has more than doubled in price since mid-September alone, hit another all-time high, hitting $6,591 on the European Bitstamp exchange, boosted by bets that it could enter the financial mainstream after CME Group said it would launch bitcoin futures trading.