By Saqib Iqbal Ahmed
NEW YORK (Reuters) - The U.S. dollar rose to a more than seven-week high against the yen on Monday, supported by a rise in U.S. Treasury yields, as traders waited on an impending Federal Reserve meeting for clues on whether U.S. interest rates could rise again by year-end.
The dollar was up 0.51 percent against the Japanese currency at 111.4 yen.
"The dollar-yen is the most U.S. interest rate-sensitive currency pair right now. With U.S. yields creeping up, the dollar-yen is creeping up," said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
U.S. Treasury yields rose on Monday as investors prepared for a potentially more hawkish Federal Reserve at its two-day policy meeting this week, after the Bank of England surprised investors last week with talk of a possible rate hike.
The U.S. central bank is widely expected to announce at the conclusion of its meeting on Wednesday that it will begin paring its massive portfolio of Treasuries and mortgage-backed securities, with the reductions likely to start this year.
"The primary reason U.S. yields are creeping up is after thinking about it clearly the market has decided that the Fed is unlikely to change the December 2017 dot - still saying they expect one more rate hike in 2017," BMO's Anderson said.
Last week was the greenback's best against the yen since November, up 2.8 percent, as a rise in U.S. yields bolstered its appeal against the low-yielding yen and data showing a pickup in U.S. consumer prices helped kindle expectations that the Fed could hike rates again in December.
An easing in concerns about North Korean missile tests after an uneventful weekend was also helping the dollar, Alfonso Esparza, senior currency analyst at Oanda in Toronto, said.
The Bank of Japan meets this week, although it is widely expected to maintain its massive asset buying campaign at a meeting on Thursday.
The dollar index <.DXY>, which tracks the greenback against six major currencies, was up 0.14 percent at 92.002.
Sterling slid nearly 1 percent, retreating from its highest level since the Brexit vote, after Bank of England Governor Mark Carney said any coming interest rate rises would be limited and gradual.
The Canadian dollar weakened against the greenback after Bank of Canada Deputy Governor Timothy Lane said the central bank will pay close attention to how the economy responds to both higher interest rates and a stronger Canadian dollar, and remains data-dependent as it looks ahead to further decisions on interest rates.
(Reporting by Saqib Iqbal Ahmed; Editing by Bernadette Baum and Lisa Shumaker)