By Alun John and Ankur Banerjee

LONDON/SINGAPORE, June 30 (Reuters) - The steadily climbing dollar pushed the yen down to levels not seen since 1986 on Tuesday, heightening expectations that direct intervention from Tokyo was near, even if not immediate, and also putting the ‌euro under pressure.

The U.S. dollar climbed to as high as 162.41 yen for the first time in 40 years and was last ‌at 162.34, up 0.2%. Japanese Finance Minister Satsuki Katayama reiterated that authorities were ready to respond appropriately at any time, but refrained from stronger rhetoric.

"The dollar is the main story ​at the moment and dollar/yen the key focus," said Lee Hardman, senior currency analyst at MUFG.

The dollar has been supported by markets seeing a higher chance of Federal Reserve rate hikes. U.S. inflation is well above target, the economy is growing and policymakers' new quarterly projections show nine out of 19 anticipate a rate hike by year-end.

"While our view is ultimately the Fed can look through this inflation pick up and the dollar can give back some gains, there ‌isn't an immediate trigger for the that unless we ⁠get softer data or Fed officials dial back the rhetoric," Hardman said.

Thursday's U.S. non-farm payrolls data will be closely watched, as will other jobs data this week.

The dollar index, which measures the U.S. currency against six other units, clawed ⁠back some of its overnight losses to be last at 101.32, set for a 1.4% rise in the quarter after gaining 1.6% in the first three months of 2026.

YEN'S FIGHT AGAINST THE TIDE

The dollar's strength has been most visible on the Japanese yen. Even with the Bank of Japan's latest rate hike, rates remain far ​below ​those in the United States, leaving a wide yield gap that favours the dollar ​and sustains carry trades, in which investors borrow cheaply in ‌yen and invest in higher-yielding currencies.

The Japanese currency was set for a 2% drop in the second quarter, its fourth straight quarter of decline, its longest such streak in four years as a wide interest rate gap drags the yen lower.

Japanese authorities stepped into the market spending 11.7 trillion yen ($72.25 billion) in April and May to support the currency, but the impact of this has already faded.

"We think they'll come in again at some point," said Hardman, "though the move in April and May didn't really reverse the trend so maybe that's made them more reluctant."

He also noted that, unlike in April, ‌this time the yen had only really been weakening against the dollar. The euro ​was last at 184.97 yen, elevated compared with historical levels, but 1.5% below its April ​record high of 187.95.

Elsewhere, the euro dipped 0.26% to $1.1398, not far ​from the one-year low it hit last week. As well as being on the other side of the strong ‌dollar, on Wednesday the currency was also digesting cooler inflation ​data from France, Italy and major German ​states.

The European Central Bank hiked rates earlier this month, and markets expect it to do so again by year-end, though if inflation slows and the economy struggles there is a chance it may not.

Sterling was down 0.2% at $1.3234, and currencies of commodity exporters were under pressure, ​as oil and gas prices ease. Norway's crown ‌was at 9.951 per dollar, its softest in six months, and 11.31 per euro, its softest in five.

The Canadian dollar was at ​C$1.4228 to its U.S. counterpart, near last week's 14-month low, and the Australian dollar hit a three-month low of $0.6867.

($1 = 161.9300 ​yen)

(Reporting by Ankur Banerjee in Singapore; Editing by Alex Richardson and Barbara Lewis)