The US dollar hovered near a two-month high on Tuesday as volatile oil prices and a rapid climb in Treasury yields lent support to the currency. The dollar index stood at 101.27, on track for a 1.8 per cent gain in September, its best monthly performance since June.

The euro traded near its weakest level in three months at $1.1360, while sterling slipped to $1.3242, also close to a three-month trough. Brent crude futures pushed above $107 a barrel after US President Donald Trump rejected Tehran’s ceasefire proposal, reviving doubts about efforts to end the Iran war.

A deepening selloff in US Treasuries pushed the 10-year yield to its highest since 2007 and the 30-year to its highest since 2004, with the two-year yield closing in on 5 per cent. Traders are now awaiting US data later in the week, including the PCE price index and nonfarm payrolls, for clues on the Federal Reserve’s rate path. Markets see a more than 70 per cent chance of a rate hike at the end of October.