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Dollar hits two-week high

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LONDON (Reuters) – The dollar hit a two-week high against the yen with another round of solid gains yesterday as investors focused again on the US reflation trade which dominated the aftermath of Donald Trump’s election in November but has stalled this year.
 
All eyes are fixed on the testimony by Federal Reserve chief Janet Yellen this week after signs that other policymakers at the US central bank are leaning towards more hikes in interest rates than the two currently priced in by markets.
 
That would help the dollar and reports that Mr. Trump did not even discuss the currency or its strength at weekend talks with Japanese Prime Minister Shinzo Abe did likewise.
 
The new president drove the greenback to its strongest gain since mid-December last week by promising a “phenomenal” tax reform for US companies. Investors hope that signals the focus of day to day commentary is shifting away from trade protectionism and security, and towards economic growth.
 
“Is Trumpflation back with a vengeance? Probably investors will want to wait but it does seem that all of the cards for another bull run for the dollar may be falling back into place,” said Viraj Patel, a strategist with Dutch bank ING in London.
 
“There can only be upside risk going into Yellen’s testimony this week.”
 
The dollar was up 0.4 percent at 113.63 yen in early deals in London, having reached as high as 114.17 yen in Asian trading. It was marginally lower against the euro at $1.0654 and around a third of a percent lower at $1.2525 to sterling.
 
Ms. Yellen will testify in Congress today and Wednesday.
 
China’s yuan was also a mover overnight, weakening in the face of the dollar’s strength at the end of last week to hit its lowest in a month.

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