The dollar climbed versus the euro and yen as bond yields rose before the Federal Reserve’s interest-rate decision Wednesday.

The greenback gained as U.S. two-year yields reached the highest level since May 2010 after a report showed core inflation rose in November for a third month. A measure of price swings in the foreign-exchange market accelerated to close to the most this month.

With futures contracts showing a 78 percent likelihood that the U.S. will raise its benchmark from near zero on Wednesday, traders are looking past the first increase and contemplating a landscape of relatively low borrowing costs for years to come. A gauge of the dollar has surged 8 percent in the past year in anticipation of the Fed raising rates in contrast with counterparts in Europe and Japan who are carrying out unprecedented stimulus.

The dollar added 0.7 percent to $1.0913 per euro as of 2:02 p.m. New York time, after dropping as much as 0.6 percent. The currency gained 0.6 percent to 121.77 yen.

 

Source : Bloomberg