Dollar Climbs Near Two-Week Highs Amid Rate Hike Bets

The US dollar reached near two-week highs on Monday as investors increased bets on a rate hike following hawkish comments from Federal Reserve Chair Kevin Warsh. This shift in market sentiment came after Warsh stated that if policymakers don't get confidence that inflation is heading down to 2%, the central bank 'will have work to do.'

This statement fueled expectations of a September rate hike, with markets increasing the implied probability to 57%. Yields on two-year US Treasury notes also rose to a one-month high of 4.33%. Warsh's defense of the inflation target has reduced pressure on the dollar and shifted focus back to economic fundamentals.

The yen slipped past the closely watched 160-per-dollar level, with investors now focusing on incoming US data, particularly Friday's nonfarm payrolls report and next week's consumer inflation figures. The euro edged up 0.1% to $1.1591, while sterling was little changed at $1.3539.