The dollar hit a 14-month peak against a basket of currencies on Tuesday as investors bet that the U.S. economy is growing at a pace that is likely to lead the Federal Reserve to begin raising interest rates next year.
The U.S. currency made broad gains on Monday, boosted by research from economists at the San Francisco Fed indicating investors may be underestimating when the Fed is likely to hike rates.
The dollar also has benefited from a weak euro, which has deteriorated since the European Central Bank last week cut rates to new lows and launched an asset-purchase program to ward off deflation.
Better U.S. economic data has boosted the view the Fed may be closer to raising rates, and the dollar's gains have come at the same time as rising Treasury yields. Still continuing slack in the labor market is also viewed as keeping the Fed on hold for several more quarters.