The dollar ground higher against the basket of currencies used to measure its broader strength on Tuesday, hitting a four-month high against the yen on the back of the past fortnight's 25 basis-point rise in 10-year US government bond yields.

The New Zealand dollar fell to its lowest since June 23 after a report of a large earthquake hitting off its South Island, although there were no immediate reports of damage.

The dollar index rose just over 0.1 per cent to 96.138 , gaining 0.1 per cent against the euro and around a third of a per cent to 114.43 yen, its strongest since mid-March.

“The real story at the moment is the rise in US real yields,” said Richard Benson, co-head of portfolio investment with currency fund Millennium Global in London.

“That does look like being the theme for the moment. Dollar yen is properly supported, and I don't think there is even that much participation yet (in that trade).”

Central bank events

Central bank events this week will again dominate market attention.

The Bank of Canada, which is widely expected to raise interest rates after strong signals from its main policymakers over the past month, meets on Wednesday.

US Federal Reserve chief Janet Yellen gives two days of testimony to lawmakers on Wednesday and Thursday while Bank of England Governor Ben Broadbent speaks later on Tuesday.

The data since late last week has painted a grim picture of the UK economy, undermining the hints from others at the Bank that a rise in interest rates is likely later this year.

Canadian bank RBC have a weaker pound against the dollar as their trade of the week.

“A more measured speech by Broadbent and softer employment and wage numbers tomorrow would reinforce our view that the sterling correction from $1.3042 should extend further,” they said in a note on Tuesday.

Sterling was roughly stable at $1.2887 and 88.37 pence per euro, respectively.

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