Dollar Climbs as Yen Hits New Lows Amid Rising Oil Prices and Rate Hike Expectations

The dollar is poised for its biggest weekly gain since mid-June due to rising oil prices and increasing expectations of a rate hike by the Federal Reserve. The yen, on the other hand, has dropped to its largest weekly percentage decline in over two months, lingering at 40-year lows despite Japan's verbal efforts to support it.

Analysts see limited effect from these efforts, citing the need for coordinated steps such as a more aggressive path of rate hikes by the Bank of Japan (BOJ). The U.S. Treasury Department has joined calls for rate hikes by the BOJ, warning that excessive currency volatility is undesirable.

The dollar index inched up 0.01% to 101.46 and was up about 0.7% for the week, on track for its biggest weekly gain in five weeks. Against the Japanese yen, the dollar weakened 0.02% to 163.81 but was up nearly 0.9% on the week.

Michael Feroli, chief U.S. economist at J.P. Morgan, expects the Fed to leave rates unchanged at its meeting next week but looks for at least two hawkish dissents as 'some on the committee are losing patience with above-target inflation.'