Dollar Surges Amid Rate Hike Expectations, Yen Weighed Down by Renewed Tensions

The dollar strengthened to a two-week high on Monday as investors increased their bets on a rate hike following Federal Reserve Chair Kevin Warsh's hawkish remarks.

Warsh stated that the Fed will 'have work to do' if policymakers don't get the confidence they need that inflation is heading down to 2%, indicating a possible further tightening to curb price pressure.

The comments fueled expectations of a September rate hike, with markets raising the implied probability to 57% and yields on interest-rate-sensitive 2-year U.S. Treasury notes holding near a more than one-month high of 4.33%.