• Short-dated U.S. Treasury yields, the most sensitive to U.S. Federal Reserve rate policy, surged. Two-year yields touched 1.426 percent US2YT=RR, marking their highest since 2009, while benchmark 10-year yields US10YT=RR hit a nearly seven-week high of 2.353 percent.
• Analysts said traders were selling Treasuries ahead of Friday's U.S. June employment report, which could push yields higher if jobs and wage growth beat expectations.
• The Institute for Supply Management (ISM) said its index of national factory activity rose to 57.8 last month from 54.9 in May.
U.S. factory activity rose sharply in June to its highest level in almost three years suggesting economic growth in the second quarter gained some steam, while construction spending held steady in May.
• The dollar index .DXY, which measures the greenback against a basket of currencies, gained 0.6 percent in its biggest one-day gain in roughly four months helped by the economic data and rising U.S. bond yields.
The dollar stood tall early on Tuesday after upbeat U.S. data boosted Treasury yields to seven-week highs, while the focus turned to the Reserve Bank of Australia's policy decision to see if it would join a growing list of central banks adopting a hawkish tilt.
The dollar index against a basket of six major currencies was steady at 96.149 .DXY after rising 0.6 percent overnight as a stronger-than-expected rise in the June Institute of Supply Management (ISM) national factory activity index propelled the 10-year Treasury yield US10YT=RR to seven-week highs.
Monday's developments helped the dollar index bounce back from a nine-month low of 95.470 plumbed on Friday.
The euro was up 0.1 percent at $1.1373 EUR= after dropping 0.6 percent overnight. The common currency has taken a step back from a near 14-month high of $1.1445 scaled on Friday.
The dollar was steady at 113.360 yen after going as high as 113.480 late on Monday, its strongest since mid-May.
• The immediate focus for markets was on the RBA's policy decision due later in the day.
While the RBA is not expected to hike interest rates this time, market participants are looking for any signs of the central bank joining a shift toward a hawkish stance by peers like the European Central Bank, Bank of England and the Bank of Canada.
• Federal Reserve Chair Janet Yellen was hospitalized over the weekend to treat a urinary tract infection while she was vacationing with her family in London, the Fed said in a statement on Monday.
"She was admitted Friday and released Monday," the Fed said. "She is returning to Washington, D.C., and expects to resume her schedule as planned this week."
• U.S. President Donald Trump discussed hot-button issues like climate change, trade and migration in calls with German and Italian leaders on Monday, before a summit this week of the G20 leading economies that could expose sharp policy differences.
Trump is preparing for the two-day Group of 20 meeting that starts in Hamburg, Germany, on Friday, just over a month after a G7 summit in Sicily showed deep divisions between Trump and other Western leaders on such issues.
Trump will hold separate meetings with various leaders in Hamburg, including host German Chancellor Angela Merkel, and a potentially difficult first meeting with Russian President Vladimir Putin.
• Oil rose more than 2 percent on Monday, resuming its longest stretch of daily gains in more than five years after data pointed to diminished U.S. output, though analysts said news of rising OPEC production could cap gains.
Brent crude futures closed up 91 cents, or 1.9 percent, to $49.68 a barrel. The price rose 5.2 percent last week for the first weekly gain in six.
U.S. crude futures closed up $1.03, or 2.2 percent, to $47.07 a barrel, an almost one-month high. U.S. crude futures trading volumes were low a day before the U.S. Independence Day holiday.
Crude was up for an eighth straight session, the longest stretch of gains since February 2012.
Reference: Reuters
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