The Dollar edged higher on Tuesday, holding close to a two-month peak as volatile oil prices and a sharp rise in US Treasury yields provided support.
However, its advance was restrained as traders looked ahead to key US economic data due this week for further signals on the Federal Reserve’s interest rate outlook.
The Euro remained around its weakest level in three months at $1.1360 after European Central Bank President Christine Lagarde indicated that a measured approach to tackling inflation remained appropriate. Sterling slipped 0.1% to $1.3242, also staying close to a three-month low.
The Dollar index, which tracks the US currency against a basket of major peers, was marginally higher at 101.27. It is on course for a 1.8% gain this month, which would mark its strongest monthly performance since June, Reuters reports.
Oil prices edged higher, with Brent crude futures climbing above $107 a barrel as markets questioned whether renewed efforts to end the Iran war would succeed after US President Donald Trump rejected Tehran’s ceasefire proposal.
Meanwhile, a deepening sell-off in US Treasuries sent yields to fresh highs. The benchmark 10-year yield reached its highest level since 2007, while the 30-year yield climbed to its highest since 2004.
The policy-sensitive two-year Treasury yield also rose to its highest level in over two years, moving closer to the 5% mark.
Investors are looking ahead to a series of key US economic releases this week, including the PCE price index on Wednesday and nonfarm payrolls on Friday. The data is expected to provide further insight into the Federal Reserve’s interest rate outlook, with stronger figures potentially reinforcing expectations of additional rate increases.
According to CME Group’s FedWatch tool, markets are now pricing in a more than 70% probability of a Fed rate hike at the end of October, up from 57% a week earlier.
Elsewhere, Australia’s central bank raised its cash rate to a 15-year high of 4.60% on Tuesday, delivering a unanimous hike as it warned that inflation remained too high and further increases could be necessary.
The Australian Dollar briefly jumped to $0.7029 following the decision before giving back some of its gains, while the New Zealand Dollar slipped 0.2% to $0.5657.
In addition, the Japanese Yen edged lower to 157.5 per Dollar, surrendering some of Monday’s gains after Japan’s top currency official, Atsushi Mimura, warned that markets should take seriously the “very clear” message delivered by Tokyo and Washington last week. The comments kept traders alert to the possibility of currency market intervention.
Moreover, the offshore Yuan was broadly steady at 6.71 per Dollar after last week’s US-China summit produced limited concrete results.