The U.S. currency was also near the strongest in a month against the yen before a report today that may show the Fed's preferred measure of prices rose in June by the most this year, supporting the case for higher borrowing costs. Crude oil rose for a second day as a tropical storm threatened U.S. output.
The dollar traded at $1.5579 per euro as of 7:40 a.m. in New York, from $1.5564 on Aug. 1, when it reached $1.5515, the highest since June 24. The dollar bought 107.99 yen, from 107.71 yen. It touched a one-month high of 108.38 yen July 31. The euro traded at 168.26 yen from 167.55 yen. The dollar may rise to $1.5540 per euro within a month, said Mellor.
The Fed will keep its target lending rate at 2 percent at its meeting tomorrow, according to the median estimate of economists surveyed by Bloomberg News. The U.S. central bank should raise rates ``sooner rather than later'' to contain inflation expectations, Philadelphia Fed President Charles Plosser said on July 22.
Futures contracts on the Chicago Board of Trade showed a 53 percent chance the Fed will raise its target rate by at least a quarter of a percentage point by Oct. 29, up from 51 percent a day earlier.
Currency traders reversed their bets that the yen will gain against the dollar, data based on futures contracts from the Washington-based Commodity Futures Trading Commission show.
Gains in the dollar may be limited by speculation reports this week will show the U.S. services industry contracted for a second month and home sales declined, casting doubt on the strength of the U.S. economy.