The U.S. dollar hit a six-week high against the on Tuesday as traders discounted weak U.S. economic data and anticipated that the Federal Reserve would prepare markets for an interest rate increase in June in its Wednesday statement.
The dollar hit 112.30 yen, its highest since March 21, despite data on Monday showing weak U.S. factory activity and inflation and last week's release of U.S. first-quarter gross domestic product, which showed the weakest performance in three years.
Analysts said the data was not enough to stifle risk appetite, which in turn hurt the safe-haven yen. Some analysts also said the closure of Tokyo markets for the Golden Week holidays was contributing to a lack of liquidity in the yen, which exacerbated its weakness against the dollar and the euro.
"It's just a good old-fashioned risk-on trade, which correlates with the yen weakening," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.
The weakness in U.S. economic data has not altered expectations that the Fed will hike interest rates in June, analysts have said. That, in turn, has boosted the dollar against the yen and kept it relatively stable against the euro.
The euro was last mostly flat against the dollar at $1.0905. The dollar was last up 0.24 percent against the yen at 112.10 yen, not far from its six-week high.
Along with the Fed statement, traders were awaiting Friday's U.S. April non-farm payrolls report from the U.S. Labor Department. Economists polled by Reuters expect U.S. employers to have added 185,000 jobs last month, up from March's 98,000.
Optimism for Friday's jobs data and the likelihood that the Fed on Wednesday would prepare markets for rate increases boosted the dollar against the yen, said Sireen Harajli, FX strategist at Mizuho in New York.
"Even though we're seeing this softer tone coming out of the data, I think markets are still expecting positive figures," Harajli said. She said, however, that muted activity in currency markets still indicated some caution ahead of the jobs report and Fed statement.
The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.06 percent at 99.14.