Dollar Hits One-Month High as Rate Hike Expectations Soar

The US dollar has reached a one-month high due to lingering expectations of a Federal Reserve interest rate hike. The dollar index, which measures the greenback against a basket of currencies including the yen and euro, stood at 101.45, with the euro up 0.09% at $1.1377.

Although oil prices have fallen due to a pause in US attacks on Iran, easing inflation worries somewhat, US Treasury yields retreated modestly compared to other markets. This has helped keep the dollar well supported, according to Chris Weston of Pepperstone.

A growing number of major brokerages believe there is a real risk of the Fed delivering a rate hike this week, given the surge in oil prices and escalating tensions in the Middle East. Expectations for a 25 basis point rate hike from the Fed are pegged at 37.9%, up from 16% last week.

Investors will also look to US 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. Meanwhile, the Australian dollar weakened 0.11% versus the greenback, as Australia's central bank chief said underlying inflation remained too high.