Dollar Hits One-Month High as Rate Hike Chances Linger

The US dollar reached a one-month high on Tuesday as investors weighed the possibility of a rate hike by the Federal Reserve at its upcoming meeting. The dollar index, which measures the greenback against a basket of currencies including the yen and euro, edged up 0.03% to 101.55.

The Fed's policy meeting ends on Wednesday, and expectations for a rate hike have increased significantly, with 36.3% of market participants now predicting at least a 25 basis point increase, up from 16% a week ago, according to CME FedWatch.

Chris Weston, head of research at Pepperstone, said the lack of meaningful buying at the front end of the Treasury curve has helped keep the US dollar well supported. The dollar's strength is expected to continue if the Fed does deliver a surprise rate hike, with Mahjabeen Zaman, head of FX research at ANZ Bank, predicting that it would 'lend support to the dollar, probably going to see new highs and probably sustain the level of strength on the dollar especially against the lower yielders'.