Hawkish Fed lifts dollar to seven-week high; markets brace for BOE, BOJ

Attention will turn to the Bank of England, expected to keep interest rates on hold later in the day, but investors are watching for any hint that surging energy prices could force it to raise borrowing costs.

Japan's central bank is set to raise interest rates to a 31-year high on Friday and signal its readiness to keep pushing up borrowing costs, joining other major central banks in fighting persistent inflation pressures driven by soaring oil costs.

Markets will also focus on any hints BOJ Governor Kazuo Ueda gives on the timing and pace of any further increase.

That could be a key test for the yen, which jumped to a seven-month high against the dollar last week amid growing conviction in the BOJ's policy-tightening path. Japanese retail investors have maintained stubborn short positions, expecting that the yen's recent gains would be short-lived.