Dollar Hits Two-Month High Amid Inflation Fears and Rate Hike Bets

The US dollar has reached a two-month high, driven by inflation fears and rate hike bets following a strong manufacturing reading. The broad dollar strength pushed the euro to $1.1378, a two-month low, while sterling languished near a three-month nadir at $1.3231.

A stronger-than-expected purchasing managers' report overnight fanned new price concerns, and a poorly received auction of five-year U.S. Treasury notes triggered a fresh round of bond selling, with five-year yields crossing 5% for the first time since 2007.

Chris Weston, head of research at Pepperstone, said, 'Given the relative strength of US growth and increasingly aggressive Fed rate-hike pricing, the US dollar continues to stand firm in its attraction to own.'