The dollar has hit a near two-month high against the yen as the Japanese currency suffered from doubts over another Bank of Japan (BOJ) rate rise, triggered by weak capital spending data.

Sterling this morning is worth $1.8671 and 219.5700 yen, while the dollar stands at 117.5900 yen.

Reports in Japan yesterday revealed that machinery orders posted their largest monthly fall in almost 20 years in July, fuelling expectations that the BOJ will not raise interest rates in the short term.

The euro stood firm against the dollar and the yen following heightened expectations of a rate rise by the European Central Bank, with board member Juergen Stark suggesting a probable hike in October.

However, the dollar could be dented by forthcoming news on the US trade deficit, which is expected to widen to $65.50 billion from $64.80 billion in June - according to a Reuters poll of economists.

Such a monthly deficit would be the third-highest on record and the largest since January's $66.2 billion deficit.