The dollar rose in European trade on Tuesday against a basket of major rivals, extending gains for the third straight session and scaling a two-week high amid active short-covering.
It comes amid a surge in US 10-year treasury yields with investment demand growing on the dollar ahead of important US data that will pave the way for the future of US interest rates.
The Federal Reserve will release its last meeting minutes, which will shed light on future interest rate cuts in 2024.
The Index
The dollar index rose 0.8% to 102.19, the highest since December 21, with a session-low at 101.42.
The index rose 0.3% on Thursday, the first profit in five sessions, away from a five-month trough at 100.62.
The index lost 2.0% in December, the second monthly loss in a row as US 10-year treasury yields lost ground with increased purchases of US debt as the Fed prepares for policy easing.
The dollar index was down by over 2.1% in 2023, on track for the first yearly loss in three years.
The Fed took a more bearish trajectory this year with monetary policies compared to the ECB and the BOE.
US Treasury Yields
US 10-year treasury yields surged 4.0% on Tuesday, scaling a three-week high at 4.024.
Markets have reduced the pricing of a Fed interest rate cut next March from 87% to 81% while waiting for fresh evidence.
Data
Now investors await ISM manufacturing PMI data for December, in addition to the crucial US payrolls report next Friday.
Fed Minutes
The Federal Reserve will also release minutes for the December 12-13 meeting, which could include important clues on the future path of US interest rates.
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