The dollar hit an 11-week high on Tuesday as investors increased bets that the Federal Reserve would raise interest rates in December following a round of generally solid US economic data over the last few weeks. Sterling continued its downward trek following a "flash crash" event last Friday, with investors concerned about the impact of a "hard exit" by Britain from the European Union. Over the past week, the British pound has lost more than four percent of its value against the dollar.
In the United States, investors are also looking to Wednesday's release of the minutes of the latest Fed monetary policy meeting for confirmation of the market's December rate hike view. The rate futures market has attached a roughly 70 percent probability the Fed will lift rates at the December meeting. That pushed benchmark US 10-year yields to a more than four-month high elevating the dollar against the yen, the currency pair most sensitive to moves in the US government bond market. The greenback has risen in 10 of the last 11 sessions versus the Japanese currency.
"Recent data on jobs, manufacturing and services growth have shown compelling strength that could green light a US rate hike by the end of the year," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. In mid-morning trading, the dollar index - which measures the greenback against six major peers - jumped 0.5 percent to 97.450, after hitting its highest since late July. The euro fell to a more than two-month low against the dollar, and was last down 0.6 percent at $1.1077. Against the yen, the dollar was flat at 103.65, but has gained more than two percent so far this month. The British pound, which has weakened for four straight sessions, fell 0.8 percent to $1.2257.