The dollar fell against the euro Wednesday on speculation that the European Central Bank would signal it was moving closer to its first interest-rate increase in more than five years. But the U.S. currency hit a two-year high against the yen after the Federal Reserve raised interest rates and signaled that more increases were likely. The Federal Reserve raised the U.S. target rate to 4 percent on Tuesday, the 12th straight quarter-point increase since June 2004. The European Central Bank is not expected to raise interest rates at its meeting Thursday, but investors are betting that officials will say at the bank's news conference that they will make a move soon. European Central Bank officials over the past two weeks have expressed the bank's intention to fight inflation, fueling speculation that it would raise rates by December. The president of the European Central Bank, Jean-Claude Trichet, and the president of the Bundesbank, Axel Weber, who votes on rate policy for the euro zone, said last month that their credibility depended on curbing inflation. In late trading, the euro rose to $1.2061 from $1.2014 on Tuesday. The dollar rose to ?116.835 from ?116.630 and fell to 1.2796 Swiss francs from 1.2878 francs. The pound rose to $1.7750 from $1.7656. The yen fell against the dollar on speculation that the Bank of Japan would keep interest rates the lowest among major economies. Analysts said the yen was set to fall more in the short term despite a bright domestic picture in Japan that has helped stocks.