LONDON: The U.S. dollar rose to its highest level in more than a year on Tuesday as traders positioned for a more hawkish Federal Reserve despite oil prices inching lower on ebbing Gulf tensions, while the yen flirted with a four-decade low.

Fed funds futures are pricing in more than an 80% chance of a rate hike by September, while BofA Global Research and Deutsche Bank abandoned prior forecasts for steady policy and now expect the Fed to raise rates within the year, citing economic resilience.