Investing.com - The dollar rose against a basket of the other major currencies on Tuesday as markets remained confident that the Federal Reserve will hike interest rates this month, while U.S. data showed that the trade deficit jumped to an almost five-year high in January.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 101.82 at 08.43 ET, recovering from Monday’s one-week low of 101.22.
A rate hike at the Fed’s March 14-15 meeting is seen as a near certainty after Fed Chair Janet Yellen said last week that a rate hike "would likely be appropriate" this month if employment and inflation continued to evolve in line with expectations.
Futures traders are pricing in around an 84% chance of a hike at the Fed's next meeting, according to Investing.com’s Fed Rate Monitor Tool.
The dollar showed muted reaction to data showing that the U.S. trade deficit increased 9.6% to $48.5 billion in January, the highest level since March 2012 and in line with economists' expectations. December's trade deficit was unrevised at $44.3 billion.
The dollar was higher against the yen, with USD/JPY up 0.19% to 114.08.
The dollar hit a one-week low of 113.54 against the yen on Monday as rising geopolitical tensions in the wake of a North Korean missile test spurred safe haven demand for the Japanese currency.
The euro slipped, with EUR/USD down 0.13% to 1.0566, oof Monday’s two-week highs of 1.0639.
Investors were continuing to monitor developments in the French presidential election campaign after scandal-hit Francois Fillon won his party's backing to be its candidate after former French Prime Minister Alain Juppe ruled himself out of the race.
Outgoing President Francois Hollande was warned that far-right candidate Marine Le Pen could win the election and vowed to "do everything" in his power to stop it happening.
Investors’ fears that a victory for anti-EU Le Pen could potentially trigger a French exit from the euro zone.
Sterling was at seven-week lows against the dollar, with GBP/USD down 0.35% to 1.2193.
Meanwhile, the Australian dollar was higher after the country’s central bank kept interest rates on hold on Tuesday and gave no indications that it is considering further easing.
AUD/USD was up 0.28% to 0.7599 after initially rising as high of 0.7633.