NEW YORK: The dollar rose against the yen and euro on Friday in scant volume, with many major markets still closed after the Christmas holiday.
The greenback climbed to near a 7-1/2-year peak against the yen and close to a 2-1/2-year high versus the euro based on the view the US economy is expanding at a fast enough clip that the Federal Reserve could consider ending its near-zero interest-rate policy in mid-2015, analysts said.
"You have to be long-term bullish on the dollar next year. There's going to be a dip-buying mentality" said Rob Zukowski, senior technical analyst at 4Cast Ltd. based in New York.
Data on Tuesday that showed the US economy growing at its fastest quarterly pace in 11 years underscored the divergence in paths between the world's largest economy and those of Japan and Europe, where monetary policy is expected to remain loose to stimulate growth and ward off deflation.
Data released on Friday highlighted some of the struggle the Bank of Japan faces. The year-on-year rise in Japan's core consumer prices slowed to 2.7 percent in November from 2.9 percent in October amid the recent decline in crude oil prices.
Widening differentials between US and record-low Japanese and German yields should favor the dollar as more traders return from holidays.
US two-year Treasuries yield held a 0.84 percentage point premium over the comparable German Schatz yield , which was the largest since early 2007. It held a 0.75 point yield premium over two-year Japanese government debt , the biggest since May 2010, according to Reuters data
After a dip to 120.08 yen the dollar was up 0.3 percent at 120.45, within sight of a 7-1/2-year high of 121.860 set on Dec. 7 on the EBS trading system.
The dollar also took back some ground against the euro after two days on the retreat.
The euro inched down 0.4 percent to $1.2172, edging back towards a 28-month trough of $1.2165 reached on Tuesday in reaction to the unexpectedly strong US third-quarter gross domestic product growth.
The dollar index, which tracks the greenback's value against a basket of currencies, was up 0.1 percent at 90.047. On Tuesday, it hit 90.159, the strongest since March 2006.
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