Tokyo: The dollar was holding near two-month highs against the yen and the euro on Monday on growing expectations that the Federal Reserve will increase interest rates again in August after an anticipated rise this week.
The market is keenly awaiting the Fed's statement at the end of a two-day policy meeting on Thursday for clues about whether it will keep raising rates to stave off inflation.
At the end of the May meeting at which the central bank hiked rates for the 16th straight time, the Fed was more hawkish than markets had expected in its statement, saying "some further policy firming may yet be needed to address inflation risks."
"Thursday's statement will show their thinking about the possibility for an additional rate hike in August," said Kikuko Takeda, currency strategist at Bank of Tokyo-Mitsubishi UFJ.
"I don't expect much change in the nuance of the statement," he added.
After the dollar fell for most of the year partly on expectations that the Fed was close to pausing its two-year run of raising rates, the currency has rallied this month on signs that its rate advantage will widen after this week's meeting.
By 0225 GMT, the dollar edged down to 116.40 yen but stayed near the two-month high of 116.60 struck on electronic trading platform EBS on Friday.
The euro inched up to $1.2515 but was in sight of the two-month low of $1.2478. It eased slightly to 145.65 yen.
New orders for US-made durable goods unexpectedly fell 0.3 percent in May, data showed on Friday, doing nothing to dent the dollar's rally.
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