Dollar strengthens as markets shake off yuan scare

London

THE dollar rose against a basket of currencies for a third trading day running on Monday, as worries about a China-led "currency war" abated and traders focused instead on the prospect of higher US interest rates.

The dollar index hit a one-month low last week after the People's Bank of China unexpectedly devalued the yuan, dampening expectations that the Federal Reserve will raise interest rates in September. But after the PBOC set the yuan slightly above its fixing rate on Friday, soothing fears of a bigger devaluation, markets have once again turned their attention to monetary policy diverges between the world's major economies.