Dollar rises on Atlanta Fed chief's rate-hike view

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The dollar rose on Tuesday as a top U.S. Federal Reserve official voiced support for an interest rate increase in September despite a batch of disappointing data on wages and manufacturing activity.

Atlanta Fed President Dennis Lockhart told the Wall Street Journal said it would take "significant deterioration" in the U.S. economy for him to not support a rate hike in September.

Lockhart is a voter this year on the Federal Open Market Committee, the Fed's policy-setting group. He has a reputation as a centrist and has sided with Fed Chair Janet Yellen on her policy stance.

"He is seen as a swing vote and he has become increasingly hawkish," said Ian Gordon, G10 currency strategist at Bank of America Merrill Lynch in New York.

Lockhart's remarks jolted the dollar, which had been stuck in a narrow range against most currencies and whose earlier losses had boosted currencies closely linked to commodities.

The dollar index was up 0.4 percent at 97.96, wiping out earlier losses.

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The greenback rose 0.3 percent on the day to 124.33 Japanese , while the euro fell 0.6 percent at $1.0883.

A record small rise in second-quarter U.S. wages posted on Friday and a surprise fall in a private measure of domestic manufacturing activity on Monday had raised doubts about a possible Fed interest rate hike in September.

Bets that the Fed would delay a hike had hurt the greenback and stabilized the currencies of oil and other commodity exporters like Canada.

The Canadian dollar fell to its lowest since August 2004. It last traded at C$1.3182 per U.S. dollar.

Commodities markets had weakened on worries about excess supply and falling demand from China.

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Brent crude prices in London hit a six-month low before recovering 1 percent at $49.99 a barrel, while benchmark copper prices was up 0.35 percent.

The Australian dollar jumped after that country's central bank, in a policy statement, dropped a long-used reference about a further decline of the Aussie being necessary to support the economy. Analysts cautioned that the Aussie's long-term prospects remain weak.

"I wouldn't rush out to declare the four-year downtrend in the Aussie against the dollar over, but it's not the most attractive short looking forwards," said Kit Juckes, a strategist with Societe Generale in London.

The Aussie was up 1.3 percent at $0.7382, recovering further from a six-year trough of $0.7234 set last week.