The dollar maintained its stability on Monday, amid growing expectations of the Federal Reserve (the US central bank) raising interest rates, despite news of an agreement on the debt ceiling that kept some hedgers away from the US currency.

The dollar recorded its highest level in 6 months against the Japanese currency at 140.91 yen in early Asian trading, before losing some of these gains and trading in the latest trading at 140.39 yen. The dollar is heading for monthly gains of around 3 percent against the yen.

The yen's new decline against the dollar came on the back of rising US Treasury yields, with increasing bets on US interest rates remaining high for a longer period.

Trading in US Treasury bonds in Asia was halted on Monday due to the Memorial Day holiday in the United States. UK markets were closed Monday due to a holiday.

Against the dollar, the euro rose 0.02 percent to $1.0735, while the pound sterling fell 0.01 percent to $1.23495.

Money markets are now 62 percent expecting the Federal Reserve to raise interest rates by 25 basis points in June, compared to a forecast of nearly 26 percent a week ago, according to CME's Fed Watch data.

debt ceiling agreement

Optimism dominated sentiment in Asia as a result of the news of US President Joe Biden and House Speaker Kevin McCarthy's agreement to suspend the $31.4 trillion debt ceiling until January 1, 2025.

Biden said on Sunday that the agreement is ready to be presented to Congress for a vote.

The wave of optimism pulled the risk-sensitive Australian and New Zealand dollars away from their lowest levels in six months, which they recorded last week.

The Australian dollar rose 0.41% to $0.6545, while the New Zealand dollar rose 0.29% to $0.60645.

The dollar index fell in the latest trading 0.15 percent to 104.11 points, however, it remained near the highest level in two months, which it recorded last week, at 104.42 points.

On the other hand, pressure continued on the Turkish lira to remain at 20.04 pounds per dollar, after it fell to a record level of 20.06 pounds per dollar on Friday.