Dollar strengthens

The dollar strengthened to a six-year high against the yen on Wednesday as US Treasury yields ground higher, while the Australian dollar sank to six-month lows as investors unwound carry trades that have benefited the commodity currency.
The greenback has gained on expectations that the ongoing improvement in the US economy will lead the Federal Reserve to begin raising rates again next year, while the euro and the yen are being weighed down by flagging economies and slow inflation in Japan and the euro zone.
"There are so many factors that are supporting the dollar at the moment, mainly its better performance in the US, which will likely bring a more hawkish tone from the Fed," said Sireen Harajli, a foreign exchange strategist at Mizuho Corporate Bank in New York.
The dollar rose 0.54 percent to 106.76 yen. It also gained against the euro, adding 0.17 percent to $1.2913, but the euro held above a 14-month low of $1.2858 touched on Tuesday.
The dollar index slipped 0.07 percent to 84.136, just below Tuesday's 14-month high of 84.519. It is within striking distance of its 2013 peak of 84.753, and a break above that level would take it to highs not seen since mid-2010.
US Treasury yields have climbed this month as investors factor in the chances of a more hawkish central bank. Two-year notes are within sight of a three-year peak of 0.590 percent set in late July while the benchmark 10-year note's yield rose back above 2.50 percent after testing such levels on Tuesday.
The Australian dollar, meanwhile, is being hurt by falling iron ore prices and a weaker commodities demand from China. At the same time, hedge funds have been pulling out of carry trades, where investors borrow cheaply in the dollar to buy other, higher-yielding currencies, which had been supporting the Aussie dollar. The Aussie fell 0.40 percent to $0.9163, after earlier falling to $0.9114, its lowest since March.
Sterling also gained despite worries about an upcoming vote for Scottish independence. It rose 0.70 percent to $1.6216, after hitting a fresh 10-month low of $1.6060 on Tuesday. Britain's three main political parties have gone into campaign overdrive since a poll at the weekend showed Scottish nationalists gaining the upper hand. Several recent surveys had shown the September 18 vote as too close to call.
The pound has fallen 3 percent since the first survey showing the sharp shift toward independence at the start of last week. To many, that still seems a small move given the risk the vote next week may break up the United Kingdom and lead to years of procedural uncertainty.