* Dollar hits 2-week high vs yen
* Rise against Aussie, kiwi shows concern about higher rates
* Dealers say euro supported by corporate demand
* Traders cite large hedge fund bets on Swiss franc vs euro
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Patrick Graham
LONDON, March 2 Further signs that the U.S.
Federal Reserve is swinging toward a March rise in interest
rates kept the dollar rising against the yen and a handful of
other major currencies on Thursday, although the pace against a
resilient euro was slower.
Governor Lael Brainard, a dove on the U.S. central bank's
open market committee, was the latest to say on Wednesday that
an improving global economy and a solid U.S. recovery mean it
will be "appropriate soon" to raise rates.
That fuelled a rise of more than half a percent to a
two-week high of 114.40 yen and gains of up to 1 percent
against the Australian and New Zealand dollars, typically sold
when investors are reining in their appetite for risk.
The latter moves, and the relatively minimal scale of the
gains against the euro and sterling, pointed to a
more mixed picture, however, even as expectations of a rise in
rates this month double.
The euro has proven strong around $1.05 and the losses for
both European stock markets and the commodities currencies point
to worries about the impact of higher U.S. rates and a higher
dollar on global growth.
"The fact that the dollar hasn't managed to rally to any
order of magnitude is of concern to dollar bulls," said Richard
Benson, co-head of portfolio management with currency fund
Millennium Global in London.
"The problem from here is that if you haven't been involved
for a period of time, are you going to bet against the euro when
it's almost fully-priced for the Fed? The next two percent (move
higher for the dollar) may be very sticky."
The dollar index, which measures the greenback against a
basket of six major currencies, was just 0.25 percent higher on
the day on Thursday at 102.03.
Against the euro it gained just 0.3 percent to $1.0518, with
traders citing a steady drip of corporate demand for the single
currency, which also fuelled a rise against sterling on
A widening of U.S.-Japan interest rate differentials helped
the dollar, but the U.S. two-year yield fell back a basis point
from Asian session highs of 1.308 percent as traders
arrived at their desks in New York.
Some analysts warned that the dollar could weaken, despite
the widening interest rate differentials, should stocks retreat.
"If the Fed goes ahead with a faster pace of rate hikes and
shrinks its balance sheet, it will weigh on stock prices," said
Minori Uchida, chief FX analyst at Bank of Tokyo Mitsubishi UFJ.
"Lower share prices and wider yield differentials would
result in a weaker dollar, just like in May 2013 when Fed's
Bernanke signalled tapering."
Speeches from Fed Chair Janet Yellen and Vice Chair Stanley
Fischer on Friday are now widely expected to be the final piece
of the puzzle, along with next week's non-farm payrolls.
But Millennium's Benson and a number of others point to the
need for a bigger move in yields of longer-dated U.S. Treasuries
if the greenback is to rise further.
"Whether the Fed's next hike is in March, May or June is
less important than whether they go twice or three times this
year, and that in turn is less important than what the market
prices as a terminal Fed Funds rate," said Societe Generale
strategist Kit Juckes.
"At the moment, the market isn't convinced that Fed Funds
will peak much above 2 percent. A move higher from there would
be more supportive for the dollar than any rethink about how
fast we get to 2 percent."
(Additional reporting by Yuzuha Oka in TOKYO; Editing by Andrew