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

The US dollar has reached a two-month high as markets react to a strong manufacturing reading that's reignited inflation fears and rate hike bets. The strong PMI report sent yields higher, providing more support for the dollar.

The euro is near a two-month low of $1.1384, while sterling lingers at a three-month low of $1.3240. The dollar index, which measures the US currency against a basket of peers, holds onto a two-month high at 101.08.

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. This has pushed traders to pile into bets on another policy tightening next month.