The dollar hit a 13-month high against the euro and a basket of currencies, driven by expectations that the Federal Reserve will raise interest rates at least once this year. The dollar index touched a 13-month peak of 101.8, while the euro fell below $1.14 and the pound hit a seven-month low of $1.314. Traders now see a rate hike as soon as October and a 50/50 chance of a second by year-end, pushing 2-year U.S. Treasury yields up 14 basis points this month to 4.16%. MUFG currency strategist Lee Hardman said the rates market reflects belief the Fed will back up tough talk on inflation by hiking rates. Upcoming core PCE inflation data, expected to show a 3.4% rise, could further support the dollar, though some analysts warn the current dollar-positive feedback loop may soon burn out.