Dollar Hits One-Month High as Rate Hike Chances Rise

The US dollar has reached a one-month high as investors weigh the possibility of a rate hike at the Federal Reserve's 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.

Falling oil prices have eased some concerns over inflation, but U.S. Treasury yields retreated only modestly compared with moves in other markets overnight. According to Chris Weston, head of research at Pepperstone, 'The lack of meaningful buying at the front end of the Treasury curve has helped keep the US dollar well supported.'

The Fed's two-day policy meeting ends on Wednesday, and a growing number of major brokerages believe there is a real risk of the Fed delivering a rate hike this week. Expectations for a rate hike of at least 25 basis points from the Fed at its policy announcement are pegged at 36.3%, according to CME FedWatch, up from 16% a week ago.

Investors will also look to U.S. second-quarter GDP data and the Fed's preferred inflation gauge, core PCE inflation, this week for more clues on the health of the world's biggest economy.