Dollar Soars Near Two-Week High as Yen Falls Below 160

The dollar continued its upward trend on Monday, reaching near two-week highs as markets increased bets for an interest rate hike following Federal Reserve Chairman Kevin Warsh's hawkish remarks. The yen slipped below the closely watched 160-per-dollar level, adding to pressure on the Japanese currency.

Warsh's comments on Friday indicated that the Fed may need to take further action to curb inflation, which has been a major concern for the central bank. He stated that policymakers would 'have work to do' if they don't get the confidence they need that inflation is heading down to 2%.

The implied probability of a rate hike in September rose to 57%, with yields on interest-rate-sensitive two-year U.S. Treasury notes reaching a more than one-month high of 4.33%. OCBC's FX strategist Sim Moh Siong attributed the dollar's strength to Warsh's defense of the inflation target, which has reduced concerns about currency debasement and rebuilt the Fed's credibility.