The dollar held firm on Tuesday, staying near its highest level in two months against a basket of currencies thanks to growing expectation of an imminent U.S. interest rate hike, while the yen bounced after Japan's solid industrial output data.
The dollar's index against a basket of six major currencies .DXY =USD rose to as high as 95.968 on Monday, having jumped 4.4 percent from its 15-1/2-month low hit earlier this month at 91.919. It last stood at 95.662.
The latest spark for dollar bulls came from Federal Reserve Chair Janet Yellen, who on Friday said a rate increase in the coming months "would be appropriate," if the economy and labor market continued to improve.
The euro EUR= slipped to as low as $1.1097, its lowest since mid-March on Monday, though it has managed to bounce back from that level, which straddled its 200-day moving average. It last stood at $1.1148.
On the month, the common currency was down 2.7 percent, on course to post its first monthly loss in four months.
St. Louis Federal Reserve President James Bullard said on Monday global markets appear to be "well-prepared" for a summer interest rate hike from the Fed, although he did not specify a date for the policy move.
Bullard added a rebound in U.S. GDP growth seems to be materializing in the second quarter, but reserved his opinion on whether the Fed should hike in June or July for the next policy meeting at the U.S. central bank.
Traders are now pricing in a 28% chance for a rate hike in June and 60% in July, according to CME Group's (NASDAQ:NASDAQ:CME) FedWatch tool. September odds were at about 68%.
Reference: Reuters, Investing
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