The dollar rose temporarily to a two-year high against the yen in Tuesday morning trading in Asia before slipping back as expectations for another hike in U.S. interest rates encouraged a bullish mood on the dollar. The dollar rose to 115.40 yen in Tokyo before slipping back to 115.27 yen, above the 114.97 yen it bought in New York late Monday. That intraday high was the highest since September 19, 2003, when the dollar was at 115.49 yen. The euro slipped to $1.2003 from $1.2064 late Monday. The dollar has strengthened against the yen as signs of faster inflation in the world's largest economy make it more likely the Federal Reserve will continue to raise interest rates. Higher rates tend to help the dollar by raising the allure of assets denominated in the currency. "The market has factored in a Fed rate hike in November and December. Unless there's a big change in this outlook, the dollar will gradually move higher," said Sumitomo Trust & Banking senior FX manager Akifumi Uchida. Uchida said he expects the dollar to trade as high as 120 yen levels in a month or two as the near-term outlook on the dollar remains positive. In New York Monday, the dollar neared a 17-month high against the yen and advanced against other currencies as investors bought the dollar at what they felt was a bargain price following its slip in New York late last week. Late Monday, the British pound fell to $1.7511 from $1.7689. The dollar rose to 1.2947 Swiss francs from 1.2814, and fell to 1.1821 Canadian dollars from 1.1861. The U.S. Federal Reserve's "Beige Book," a detailed regional assessment of the nation's economy, is due Wednesday. Traders will look to it for details on economic disruption wrought by hurricanes Katrina and Rita as well as signs of accelerating inflation in particular markets.