Dollar Surges on Rate Hike Bets as Yen Hits Seven-Month High

The US dollar has strengthened against major currencies as traders increase bets on a Federal Reserve rate hike this week, while the Japanese yen remains near a seven-month high.

The euro fell to $1.1564 against the greenback and the British pound dropped to $1.3501, both down 0.3% from the previous day.

The yen has seen significant gains this month, rising nearly 4% as investors price a faster Bank of Japan tightening cycle and the possibility of Japanese investors repatriating overseas assets.

The dollar's gain is largely due to increased expectations for a Fed rate hike, with markets now seeing an 86% probability at its September 16 meeting. The US consumer prices accelerated in August, supporting the dollar and pushing Treasury yields higher.