As long-dated U.S. Treasury yields advanced, the dollar rose for a second straight session on Tuesday, climbing to a two-month high. The euro, meanwhile, fell to its weakest level since May 2025.

The Bloomberg Dollar Index gained more than 0.3%, on track for its highest close since July 28; the 10-year U.S. Treasury yield rose 5 basis points to a 19-year high, while the 30-year yield reached its highest since 2002.

Other Group of Ten currencies broadly declined during the session, with the Norwegian krone posting the largest drop as oil prices fell; the yen recorded the smallest decline.

Elias Haddad, global head of market strategy at Brown Brothers Harriman, noted that tightening policies by other major central banks have narrowed the policy divergence between them and the Federal Reserve, potentially limiting further dollar gains, but "the outperformance of U.S. economic growth and strong foreign demand for U.S. securities can offset this factor that limits dollar appreciation."

EUR/USD at one point fell 0.5% to 1.1312, its lowest since May 2025. Spanish inflation accelerated more than expected, moving further away from the European Central Bank's 2% target, reinforcing the case for the central bank to keep raising rates.

GBP/USD declined 0.3% to 1.3210, its first drop in three days. USD/CHF rose 0.4% to 0.8356, gaining for a fifth consecutive session and reaching its highest since May 2025.

AUD/USD at one point fell 0.7% to 0.6966, its lowest since July 30, after the Reserve Bank of Australia raised rates as expected but signaled that further tightening was far from certain. Governor Michelle Bullock said she hopes four rate hikes will be enough to slow inflation. USD/JPY held steady at 157.44.