Dollar Rises as Warsh Hints at Further Rate Hikes

The dollar continued its rise to a two-week high on Monday after Federal Reserve Chair Kevin Warsh indicated that further rate hikes may be necessary to curb inflation. This news boosted bets on a September rate hike, with the implied probability increasing to 57%. The comments also reduced concerns about currency debasement and improved the Fed's credibility.

Investors are now focusing on upcoming economic data releases, including Friday's nonfarm payrolls report and next week's consumer inflation figures. These numbers will shape expectations ahead of the September Fed meeting.

The yen struggled to recover from its slide past 160 per dollar on Friday, with some analysts warning that it remains under pressure due to a wide rate gap and negative real rates. The Bank of Japan's cautious monetary policy is also contributing to the yen's weakness.