Dollar Hits One-Month High as Fed Rate Hike Fears Escalate

The US dollar has reached a one-month high due to ongoing concerns about inflation and possible interest rate hikes by the Federal Reserve. The dollar index, which measures the greenback's value against a basket of currencies including the yen and euro, rose by 0.03% to 101.55.

This increase in the dollar's value comes as oil prices surged due to escalating tensions in the Middle East, despite a recent pause in US attacks on Iran that led to a slight decline in oil prices. US Treasury yields also retreated modestly overnight, but not enough to ease concerns about inflation.

Major brokerages now see a higher risk of the Fed raising interest rates this week, with 36.3% expecting at least a 25 basis point hike, up from 16% last week. Analysts believe that even a surprise rate hike would likely support the dollar and lead to new highs against lower-yielding currencies like the Japanese yen.

Investors will be watching closely for US second-quarter GDP data and the Fed's preferred inflation gauge, core PCE inflation, this week for further clues on the health of the world's largest economy. Meanwhile, other central banks are also set to make key decisions, with the Bank of England and Bank of Japan expected to keep interest rates unchanged.