Dollar Surges as Oil Prices Reach Four-Month High Amid Fed Rate Hike Expectations

The US dollar rose against most major currencies on Tuesday as oil prices reached a four-month high, boosting Treasury yields and strengthening expectations of a Federal Reserve interest rate hike.

US 10-year Treasury yields surged to their highest since 2007, hitting 5.041% and staying at just under 5.004%, as investors prepared for what many expect will be the first in a series of rate increases from the Fed to combat stubborn inflation.

Benchmark oil prices held near $105 a barrel after Yemen's Iran-aligned Houthis launched new attacks on Saudi Arabia and Gulf-Iran talks were postponed, further fueling expectations of a rate hike this week.

Juan Perez, senior director of trading at Monex USA in Washington, cautioned that investors should remain vigilant for any surprises, noting that Federal Reserve Chair Kevin Warsh's reluctance to provide forward guidance makes it 'not unthinkable' the Fed might choose not to raise rates.