Dollar Reaches One-Month High as Rate Hike Hopes Persist

The U.S. dollar continued its upward trend on July 28, reaching a one-month high due to lingering hopes of a Federal Reserve rate hike at its upcoming meeting. Despite falling oil prices easing inflation concerns, traders are still weighing the possibility of a rate increase.

The dollar index, which measures the greenback against a basket of currencies including the yen and euro, rose 0.03% to 101.55. The euro dipped 0.01% to $1.1366, while sterling eased 0.02% to $1.3284.

CME FedWatch indicates that expectations for a rate hike of at least 25 basis points from the Fed at its policy announcement are pegged at 36.3%, up from 16% a week ago. Markets are pricing in an 81% chance for a hike at the central bank's September meeting.

Mahjabeen Zaman, head of FX research at ANZ Bank, believes that if there is a surprise rate hike, it would likely support the dollar, potentially leading to new highs and sustained strength against lower-yielding currencies like the Japanese yen and Swiss franc.