* Dollar hits highest vs yen since July 27
* Sterling dips vs dollar after last week’s rally
* Focus on Fed’s Sept 19-20 policy meeting
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh (Adds U.S. market open; changes dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Sept 18 (Reuters) - The U.S. dollar rose to a more than seven-week high against the yen on Monday, supported by a rise in U.S. Treasury yields, as traders waited on an impending Federal Reserve meeting for clues on whether U.S. interest rates could rise again by year-end.
The dollar was up 0.49 percent against the Japanese currency at 111.38 yen.
“The dollar-yen is the most U.S. interest rate-sensitive currency pair right now. With U.S. yields creeping up, the dollar-yen is creeping up,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets in New York.
U.S. Treasury prices fell and yields climbed on Monday as investors looked towards the Fed’s two-day policy meeting this week for signals on whether an additional interest rate hike is likely this year.
The U.S. central bank is widely expected to announce at the conclusion of its meeting on Wednesday that it will begin paring its massive portfolio of Treasuries and mortgage-backed securities, with the reductions likely to start this year.
“The primary reason U.S. yields are creeping up is after thinking about it clearly the market has decided that the Fed is unlikely to change the December 2017 dot - still saying they expect one more rate hike in 2017,” BMO’s Anderson said.
Last week was the greenback’s best against the yen since November, up 2.8 percent, as a rise in U.S. yields bolstered its appeal against the low-yielding yen and data showing a pick up in U.S. consumer prices helped kindle expectations that the Fed could hike rates again in December.
The Bank of Japan also meets this week, although it is widely expected to maintain its massive asset buying campaign at a meeting on Thursday.
The dollar index, which tracks the greenback against six major currencies, was little changed at 91.877.
Sterling hit a 15-month high against the dollar before retreating a notch as investors wound back some of last week’s bets on a Bank of England rate rise ahead of a speech by that central bank’s Governor Mark Carney. Carney will speak at 1500 GMT.
The euro was 0.1 percent higher against the greenback at $1.1956. The euro hit a more than 2-1/2 year high against the dollar earlier in September.
“The German election, scheduled for 24 September, has the potential to squeeze the recent euro gains,” Jameel Ahmad, vice president of market research at FXTM, said in a note. (Reporting by Saqib Iqbal Ahmed; Editing by Bernadette Baum)