Dollar Firms as Markets Mull Fed Hike Odds Amid Tightening Financial Conditions

The US dollar has risen to a one-month high as traders weigh the possibility of a Federal Reserve interest-rate hike this week.

Markets are pricing a nearly 40% chance of a 25-basis-point rate increase on Wednesday, up from about 20% a week ago, according to LSEG data.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, ticked up 0.06% to touch its highest since June 25 at 101.58.

The rise in Treasury yields by 20bp across the curve over the past month means financial conditions have tightened and the Fed would be viewed as playing catch up if it decided to pull the trigger, wrote Kenneth Broux, head of corporate research FX and rates at Societe Generale.