U.S. Treasury yields rose to their highest since June and rate futures indicated the market priced in more than a 30 percent chance of a hike in September.
The dollar rose to a three-week high against the yen on Monday after senior Federal Reserve officials bolstered expectations that U.S. interest rates will rise soon.
U.S. Treasury yields rose to their highest since June and rate futures indicated the market priced in more than a 30 percent chance of a hike in September, up from 18 percent before Fed Chair Janet Yellen and her deputy Stanley Fischer spoke on Friday, according to CME Group's FedWatch tool.
For December, the odds rose to more than 60 percent from 57 percent on Friday morning.
Amid thin volumes in Europe with London shut for a public holiday, the dollar rose 0.5 percent to 102.39 yen, its highest since Aug. 9. Against a basket of major currencies , it was trading a touch firmer at 95.608, its highest in nearly two weeks.
At the Fed's annual gathering for global central bankers in Jackson Hole, Wyoming, Yellen said the case for an interest rate hike has strengthened in recent months as the labour market and economy improved.
She gave no hints on the timing of a hike, but Fed Vice Chair Stanley Fischer said her speech was consistent with expectations for possible rate increases this year.
"Fischer confirmed the broad view on the Fed Open Market Committee that the economy has strengthened of late and that interest rates should be raised gradually; possibly again next month if this week's employment report supports a rate rise," said Stewart Richardson, chief investment officer at RMG Wealth Management.
"U.S rates are likely to rise, whereas the European Central Bank, the Bank of Japan and the Bank of England are still looking to ease policy. This policy divergence should be supportive for the dollar."
In the past few months, the Fed has been swaying back and forth on whether to raise rates this year, keeping the dollar in check. Fischer said Friday's nonfarm payrolls report for August was likely to be key on the decision over a hike in the near term.
Traders said a strong number could see the dollar break out of its recent ranges.
"If the payrolls figure is strong, the dollar could move toward a test of the 105 level against the yen," said Mitsuo Imaizumi, chief currency strategist at Daiwa Securities in Tokyo.
Despite the chorus of hawkish comments from Fed officials in recent days, speculators trimmed bets on the dollar for a fourth straight week in the week ended Aug. 23, reducing net dollar-long positions to their lowest since early July.
Concerns about the strength of the U.S. economy remain, and were underscored by Friday's second estimate of U.S. gross domestic product that showed second-quarter growth was slightly lower than previously thought.