The dollar jumped on Tuesday to a five-year high against the Japanese yen as traders cranked up their bets on Federal Reserve interest rate rises, in a move that analysts say could herald broader gains for the US currency in 2022.

A 0.7 per cent rise for the dollar carried it above ￥116 for the first time since early 2017. The gains are a sign that fears over the Omicron coronavirus variant are ebbing in markets, leaving traders to focus on the outlook for monetary policy in the US and elsewhere, according to Lee Hardman, a currency analyst at MUFG.

“The scaling back of fears over Omicron disruption for the global economy has encouraged market participants to refocus on the prospect of major central banks tightening policy in the year ahead,” Hardman said. Given the Bank of Japan is widely expected to keep rates on hold for the foreseeable future, it is “not surprising” to see a rise in US bond yields this week lift the dollar against the yen, he added.