Dollar builds on gains as Fed officials indicate more rate hikes

The dollar on Tuesday broke above 112 yen for the first time in a month after a top Federal Reserve official indicated it would hike interest rates further this year, while traders await a speech from their boss Janet Yellen.

The weaker yen lifted Japanese equities but most other Asian markets were subdued with lingering concerns about the future of Donald Trump's economic agenda as he struggles to push through a controversial health bill.

Expectations for another lift in US borrowing costs were fanned after the head of the New York Fed, Bill Dudley, suggested policymakers could widen their parameters when deciding the course for monetary policy.

And San Francisco Fed president John Williams warned the world's top economy could overheat if rates were not lifted at the right time.

The dollar jumped to 111.89 yen Monday from 111.29 yen at the end of last week. And on Tuesday it hit 112.08 yen, its highest since mid-May.

They follow Yellen's increasingly hawkish tone and the bank's plan to wind down its bond-buying programme to suck excess cash out of financial markets.

Greg McKenna, chief market strategist at AxiTrader, said in a note that "Dudley expanded the Fed's mandate in a way that suggests he sees the Fed with a broader remit than just inflation and unemployment”.

Yellen is due to speak in London later Tuesday before heading to a central bankers conference in Portugal, with her remarks pored over for clues about the Fed's plans.

The weaker yen lifted Japanese equities to lead an advance across Asian markets. The Nikkei ended the morning session 0.3 percent higher.

However, Toshiba fell more than two percent after a report in the respected Nikkei business daily said the form was set to sign a deal offloading its prized memory chip business to a consortium of US, South Korean and state-backed Japanese investors.

The conglomerate is desperately trying to raise money after suffering massive losses in its US nuclear operations that have raised doubts about its future.

Among other markets Hong Kong was up 0.1 percent, Shanghai was flat, Sydney fell 0.4 percent and Singapore put on 0.4 percent. Seoul was marginally higher, Wellington edged up and Manila rallied 0.8 percent.

The pound was barely moved after Prime Minister Theresa May's ruling Conservative party signed a deal with Northern Ireland's right-wing Democratic Unionists to form a government.

The move to maintain its shaky hold on power comes after May lost her majority in this month's election, while ministers embark on tough Brexit talks with the European Union.

 - Key figures around 0230 GMT - 

Tokyo - Nikkei 225: UP 0.3 percent at 20,213.62 (break)

Hong Kong - Hang Seng: UP 0.1 percent at 25,902.98

Shanghai - Composite: FLAT percent at 3,184.28

Euro/dollar: DOWN at $1.1180 from $1.1181 at 2050 GMT

Pound/dollar: UP at $1.2722 from $1.2721

Dollar/yen: UP at 112.08 yen from 111.89 yen

Oil - West Texas Intermediate: DOWN one cent at $43.37 per barrel

Oil - Brent North Sea: UP one cent at $45.84 per barrel

New York - Dow: UP 0.1 percent at 21,409.55 (close)

London - FTSE 100: UP 0.3 percent at 7,446.80 (close)