The dollar inched up to a seven-month high against a basket of currencies on Monday, retaining momentum from upbeat US data last week that reinforced expectations of a December interest rate hike by the Federal Reserve.

A rise by US yields to four-month highs also buoyed the greenback.

The dollar index was up 0.1 per cent at 98.095 after touching 98.158, its highest since March 10.

The US currency lost a bit of steam against its Japanese peer, dipping 0.1 per cent to 104.110 yen after rising to as high as 104.480 on Friday.

The euro was flat at $1.0970, hovering close to a near three-month low of $1.0964 plumbed earlier on Monday.

Retail sales, producer price data

The dollar garnered support on Friday from strong US retail sales and producer price numbers for September - the latest indication that the US economy regained its momentum in the third quarter after a lacklustre first half.

Speculators lifted favourable bets on the dollar for a third straight week, with net longs hitting their highest in more than eight months, according to Reuters calculations and data from the Commodity Futures Trading Commission (CFTC) released on Friday.

The CFTC data showed speculators cut yen net longs to 45,000 contracts from roughly 70,000 the prior week.

“For now, support for dollar/yen is likely to come from passive selling of the yen involving winding down of positions, rather than active, speculative selling,” said Koji Fukaya, president of FPG Securities in Tokyo.

“A December Fed rate hike is mostly priced in by the market. The key to further dollar strength is how far US long-term rates can climb.”

Yellen’s comments

Also lifting the dollar on Friday, the 10-year and 30-year Treasury yields reached four-month highs after Federal Reserve Chair Janet Yellen suggested the Fed may allow inflation to exceed its 2 per cent target.

“The schedule this week isn’t packed with strong US data releases, and the market focus is likely to centre around three events,” said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.

“These would be Wednesday’s China GDP data, the ECB policy meeting after recent talk of tapering and the last US presidential debate, which would give the market a chance to confirm if Clinton has the lead over Trump.”

The third and final US presidential debate between Democrat Hillary Clinton and Republican Donald Trump will take place late on Wednesday (US time) and the ECB will hold its policy meeting on Thursday.

Clinton maintained a substantial projected advantage in the race to win the Electoral College and claim the US presidency, according to the latest results from the Reuters/Ipsos States of the Nation project released on Saturday.

Elsewhere, the pound slipped 0.3 per cent to $1.2156 . Sterling, dogged by prospects of a complex and potentially chaotic exit by Britain from the European Union, had lost nearly 2 per cent last week.

The Australian dollar was down 0.4 per cent at $0.7586 , trimming some of its gains made on Friday on the back of a bounce in commodity prices.

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