Dollar strengthens

NEW YORK: The U.S. dollar rallied to a four-month high on Monday as the 10-year Treasury yield´s climb toward the psychologically important 3 percent level spurred buying of the greenback, leaving the euro and yen lower.

The 10-year yield hit its highest in over four years at 2.998 percent, driven by worries about the growing supply of government debt and accelerating inflation as oil and commodity prices climb.

But although traders got close, the 3 percent barrier continued to hold late into Monday´s session.

The strong dollar also reflected an improved outlook on trade.

U.S. Treasury Secretary Steven Mnuchin said on Saturday he may travel to China, a move that could ease tensions between the world´s two largest economies.

"The de-escalation of trade tensions favors the dollar in the short run, particularly against the euro and yen," said Mark McCormick, North American head of foreign exchange strategy at TD Securities in Toronto, Canada.

Rising U.S. bond yields have not always fed through to a higher dollar in 2018 as U.S. political uncertainty and geopolitical tensions have sometimes caused a breakdown between interest rates and currency performance.