Dollar Hits One-Month High on Rate Hike Chances

The US dollar reached a one-month high on July 28 due to traders' anticipation of a possible 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 the euro, edged up 0.03% to 101.55. Despite falling oil prices easing inflation concerns, US Treasury yields retreated only modestly.

Chris Weston, head of research at Pepperstone, noted that 'the lack of meaningful buying at the front end of the Treasury curve has helped keep the US dollar well supported.' 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.

Markets are pricing in an 81% chance for a hike at the central bank's September meeting. Investors will also look to US second-quarter gross domestic product data and the Fed's preferred inflation gauge, core personal consumption expenditure inflation, this week for more clues on the health of the world's biggest economy.