By Joseph Adinolfi, MarketWatch , Hiroyuki Kachi

Pound adds to gains as BOE's Carney says he will finish out his term

The dollar gained against its main trading rivals on Monday, as the greenback logged its strongest monthly advance against the Japanese yen in two years.

One dollar bought Yen104.90 in recent trade, up 0.2% from Yen104.73 late Friday in New York. It's up 3.5% since the beginning of October.

On Friday, the buck touched Yen105.53, its highest level since late July, before moving sharply lower following news that the FBI would review 650,000 emails found on a laptop belonging to former Rep. Anthony Weiner, some of which contained metadata linking them to a private server used by Democratic Presidential nominee Hillary Clinton. Huma Abedin, Weiner's estranged wife, works for Clinton. Financial market commentary tended to put high odds on a Clinton victory before Friday's developments, which had helped support the dollar.

Investors are looking ahead to policy announcements from the Bank of Japan and Reserve Bank of Australia, set for late Monday Eastern Time.

Rising expectations for a Federal Reserve interest-rate increase in December helped drive the dollar's gains in October, said Christopher Vecchio, a currency analyst at DailyFX. The average 20-day correlation between the ICE U.S. Dollar index , a key gauge of the buck's value against a basket of six rivals, and the December Fed funds futures contract, an instrument used to bet on the likelihood of a rate change, rose from 0.25 at the end of September to 0.86 on Monday.

"Everything that the dollar is doing is pointing to the notion that the Fed is going to hike in December," Vecchio said.

The market's view is largely contingent on a victory by Clinton, who remains heavily favored to prevail over Republican nominee Donald Trump in next week's presidential election, Vecchio said. Investors view Clinton as the status quo candidate, expecting that she will mostly maintain policies pertaining to trade and the economy adopted by the administration of President Barack Obama.

Clinton's poll numbers remained strong on Monday, a sign that "markets may have overreacted on Friday and now are seeing a reversal of that initial move," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.

Vecchio said a victory by Clinton's opponent could lead investors to price in considerably higher political uncertainty and the odds of a December Fed rate hike would plummet should Trump win.

In other trading, the ICE dollar index was up 0.1% at 98.4040, while the euro wasdown 0.2% at $1.0970.

The British pound climbed 0.4% to $1.2237, adding to earlier gains after reports Bank of England Governor Mark Carney said he's ready to serve a full eight-year term at the helm of the central bank, defying critics who had called for his resignation (http://www.marketwatch.com/story/bank-of-england-boss-mark-carney-ready-to-stay-on-until-2021-report-2016-10-31).

The euro posted its largest monthly drop against the dollar since May, while the pound logged its largest since June, the month the U.K. voted to leave the European Union.

The South African rand rallied a national prosecutor dropped fraud charges against Finance Minister Pravin Gordhan.

Read:South African rand soars as prosecutor drops charges against finance minister (http://www.marketwatch.com/story/south-african-rand-soars-as-prosecutor-drops-charges-against-finance-minister-2016-10-31)

(END) Dow Jones Newswires

October 31, 2016 16:02 ET (20:02GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.