Dollar Rises as Oil Prices Climb to Four-Month High

The US dollar strengthened on Tuesday as oil prices surged to their highest in four months and Treasury yields reached their highest since 2007.

Benchmark U.S. 10-year Treasury yields climbed 7.2 basis points to 5.03%, while Brent oil approached $108 per barrel amid Middle East tensions, fueling inflation fears and rate hike expectations.

Markets now see a near certainty of a Federal Reserve rate increase on Wednesday, with CME's FedWatch tool pricing in over 94% probability of an interest-rate increase.

Francesco Pesole, FX strategist at ING, said 'it's quite likely they will hike at this point. What's happening in the bond market is a warning signal, and if they decide to hold rates at this stage, it can lead to unwanted turmoil.'