Dollar hits fresh 6-week peaks vs. yen, euro sterling gain

The dollar rose to fresh six-week highs against the yen on Thursday, boosted by bets for more rate hikes by the Federal Reserve this year, while the euro and sterling rose, lifted by robust service sector reports.

USD/JPY hit a high of 112.93, the most since March 17 and was at 112.88 by 09.40 GMT.

The Fed concluded its two-day policy meeting Wednesday afternoon, giving a positive assessment of the U.S. economy while keeping rates unchanged, as was widely expected.

The Fed said it expects the economy to rebound after hitting a soft patch in the first three months of the year, noting that the labor market looks solid and inflation is running close to its target.

The hawkish Fed statement indicated that policymakers think the recent weakness in the economy was temporary and that more rate hikes are coming this year.

Markets are pricing in around a 70% chance of a hike at the Fed's June meeting, according to Investing.com’s Fed Rate Monitor Tool. Odds of a September increase are seen at about 85%.

The euro rose to the day’s highs, with EUR/USD advancing 0.42% to 1.0932, within striking distance of last week’s five-and-a-half month peaks.

The single currency was boosted by data showing that euro area private sector growth rose to the highest level since 2011 last month.

Markit’s composite output index jumped to 56.8 in April, up from 56.4 in March.

The data added to hopes that the euro zone economy will continue to recover as fears over political risk and debt crises ease.

Sterling was also higher, with GBP/USD rising 0.24% to 1.2898 after data showing that activity in the UK service sector accelerated to a four-month high in April.

The report indicated that economic growth seems to have accelerated at the start of the second quarter after slowing to 0.3% in the first three months of the year.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.3% to 98.96 as the stronger euro weighed.