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LONDON - The dollar strengthened, with the Japanese yen sinking to its lowest since 2015, as the Russia-Ukraine conflict and expectations of central bank tightening kept investors cautious.

Equity markets were volatile, with European stocks slipping, following more hawkish comments from the U.S. Federal Reserve on Wednesday.

Fed policymakers signalled that they could take more aggressive action to bring down inflation, including a possible half-percentage-point interest rate hike at the next policy meeting in May.

The Japanese yen fell against the U.S. dollar for the fifth session in a row, hitting its lowest since 2015 with the Bank of Japan expected to lag policy tightening by other major central banks.

At 1248 GMT, the dollar was up 0.4% on the day versus the yen, at 121.66.

Versus a basket of currencies, the dollar was up 0.2%, trading within recent ranges.

“Market participants and investors around the world are still moving into dollars on the basis that (the Fed) will be the most aggressive or the most hawkish in terms of raising rates," said Neil Jones, head of FX sales at Mizuho.

Jones said that the combination of Fed rate hike expectations and the war in Ukraine were a "perfect storm" for dollar gains. He expects the dollar-yen pair to rise to 125.

Western leaders meeting in Brussels on Thursday will agree to strengthen their forces in Eastern Europe and increase military aid to Ukraine as the Russian assault on its neighbour entered its second month.

In the latest jolt to global energy markets, Russian President Vladimir Putin said that it would soon require "unfriendly" countries to pay for their fuel in Russia's currency, the rouble. German utilities association BDEW warned of a gas crunch.

The euro was down 0.2% on the day at $1.09785.

Euro zone business growth was stronger than expected this month, a survey showed on Thursday, although prices rose at a record pace, likely adding to pressure on the European Central Bank to raise rates.

Versus the Swiss franc, the euro was down 0.2% at 1.02265, after the Swiss National Bank held its policy rate at -0.75%, bucking the trend of other central banks which have started hiking interest rates to tackle rising inflation.

The SNB said the franc remains highly valued and that it will remain active in foreign exchange markets as necessary.

Norway's central bank raised its benchmark interest rate on Thursday as expected, and said it now planned to hike at a faster pace than previously intended.

The Norwegian crown initially slipped following the decision, before continuing its strengthening trajectory. The euro was down 0.9% on the day versus the crown at 9.47.

Commodity currencies slipped, with the Australian dollar down 0.1% on the day at $0.79151. The New Zealand dollar was down 0.4% at $0.695.

Bitcoin was a touch lower, at around $42,850.