The dollar floated near its highest level in two months against a basket of currencies on Tuesday on mounting prospects of an imminent U.S. interest rate hike.
According to CME's Fedwatch program the possibility of a rate increase at the Federal Open Market Committee's June 14-15 meeting stands at 28 percent, while the likelihood of an increase at the July 26-27 policy meeting edged up to 61 percent, more than double the level of a month ago.
Against a basket of currencies, the dollar was up 0.14 percent at 95.656 after climbing as high as 95.968, its highest level since March 28. The euro slipped to as low as $1.1097, its lowest since mid-March, but managed to bounce back from that level, which straddled its 200-day moving average. It last stood at $1.1150.
The dollar also fetched a one-month high of 111.455 yen on Monday before retreating to around 111.09 yen. The yen is being helped by better-than-expected industrial production data and month-end buying by Japanese exporters.
However, according to Koichi Takamatsu, manager of Forex at Nomura Securities, if the U.S. payroll report due on Friday shows solid job growth and if Yellen signals a rate hike in her speech on the following Monday, the dollar could break above the previous April peaks.
The Australian dollar jumped 0.7 percent to $0.7236 after strong readings on building approvals and net exports.
Equity Markets
European shares reached a four-week high on Monday with the euro zone's blue-chip Euro STOXX 50 index up 0.38 percent at 3,125.43, while Germany's DAX was up 0.46 percent, hitting a one-month high.
In Asia, MSCI's index of world shares edged up 0.03 percent. The London and New York markets were closed Monday for public holidays.