The dollar index advanced for a fourth straight session on Tuesday, reaching 101.3—its highest level since April of last year—as investors continued to price in the likelihood of Federal Reserve rate hikes later this year. The greenback also benefited from safe-haven demand following a sharp sell-off in technology stocks.
A hawkish tone from the Fed last week prompted markets to ramp up expectations of further tightening, with traders now assigning roughly a 68% probability to a September rate increase, up from 29% just a week earlier. The dollar found additional support from stronger-than-expected flash S&P Global PMI readings, which signaled resilient economic activity in June.
Attention now shifts to this week’s PCE inflation report—the Fed’s preferred inflation gauge—for further guidance on the future path of interest rates. Among major currencies, the dollar logged its largest gains against the Australian dollar and the euro.
