Dollar Rises Near Two-Month High on Treasury Yields and Oil Volatility

The US dollar is hovering near its two-month high due to increased Treasury yields and volatile oil prices. However, gains are limited as traders await key US data releases later in the week for clues on the Federal Reserve's rate path.

According to Joseph Capurso, head of foreign exchange at the Commonwealth Bank of Australia, the dollar is making 'limited gains for now' as investors anticipate stronger US economic data that will push up US interest rates and help the dollar.

The euro has fallen to its weakest level in three months, trading near $1.1367, while sterling is steady at $1.3248, not far from a three-month trough. The Reserve Bank of Australia is expected to raise its key rate later on Tuesday, causing the Australian dollar and kiwi to trade 0.1% lower.

The US data releases, including the PCE price index on Wednesday and nonfarm payrolls on Friday, are expected to support the case for further Fed rate hikes. Markets now see a more than 70% chance of a rate hike from the Federal Reserve at the end of October, up from 57% a week ago.