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U.S. Dollar Strengthens Against Yen

The dollar strengthened against the yen, hitting two-month highs Tuesday, on weak Japanese inflation and spending data, while the greenback remained flat against other major currencies in holiday-thinned trading.

Many European financial markets are closed for the Boxing Day holiday. "We don't really have major U.S. economic numbers today and London and Europe financial markets are still on holiday," said Alex Beuzelin, senior market analyst, at Ruesch International in Washington.

"We may be in for range-driven trading session and markets may have to look at technical factors as key drivers for today."

A major currency in focus was the yen after Japanese economic data issued Tuesday failed to dispel doubts that the Bank of Japan would raise interest rates next month for the first time since July.

Against the yen, the dollar rose to its highest since Oct. 26.

The latest Japanese economic reports kept investors thinking that the BOJ may not see enough data to justify a rate increase before its two-day policy meeting on Jan. 17-18, traders said.

The yen was undermined by data Tuesday showing Japan's core consumer price index rising 0.2 percent in November from a year earlier, in line with market expectations, and all-households spending falling 0.7 percent in November, smaller than the expected decline of 1.3 percent

"Japanese numbers continue to underwhelm and while there does appear to be a modest upward trend in recovery figures these are so minor that one modest negative factor could stall the process," said Ian Copsey, senior financial analyst at Globla Forex Trading in Tokyo.

"CPI appears to reflect energy prices rather than coming from domestic price pressures, consumer spending while better than expected is hardly anything to write home about. Potential is there but actual results are still standing on shaky foundations."

In other currencies, the euro lost ground against the dollar in New York, as did Sterling .

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