Dollar Surges Near Two-Week High on Rate Hike Bets, Yields Rise

The US dollar held steady near a two-week high on Monday as markets increased bets for a rate hike after Federal Reserve Chair Kevin Warsh's hawkish remarks.

Warsh said that policymakers will 'have work to do' if they don't get the confidence they need that inflation is heading down to 2%, fueling bets on a September rate hike. The implied probability of a move next month rose to 57% and yields on interest-rate-sensitive 2-year US Treasury notes held near a more than one-month high of 4.33%.

Market strategist Sim Moh Siong said Warsh's defense of the inflation target 'reduced a major drag on the US dollar' and shifted the focus back to economic fundamentals, rebuilding the Fed's credibility and easing concerns about currency debasement.