Dollar Soars on Lingering Fed Hike Fears

The US dollar has reached a one-month high on Tuesday as traders weigh a slim but lingering chance of a rate hike at the Federal Reserve's upcoming meeting. Despite falling oil prices easing some concerns over inflation, the dollar index edged up 0.03% to 101.55.

A growing number of major brokerages believe there is a real risk of the Fed delivering a rate hike this week, given the surge in oil prices during the month and the escalation in tensions in the Middle East. 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.

The BOJ is expected to leave the door open to further hikes to stem the yen's decline, although policymakers will likely stay ambiguous on the pace and timing of the moves. Chris Weston, head of research at Pepperstone, noted that 'the lack of meaningful buying at the front end of the Treasury curve has helped keep the US dollar well supported.'

The Fed will hold a two-day policy meeting ending on Wednesday, which is likely to be closely watched by investors.