HONG KONG – Meanwhile, the Japanese yen hovered near its weakest level in nearly four decades.

U.S. Treasury yields remained elevated after surging on Monday, with the interest rate-sensitive two-year Treasury yield holding near a 16-month high as traders anticipated the possibility of tighter monetary policy later this year.

The dollar index, which measures the greenback against a basket of major currencies including the euro and the yen, edged up to 101.01, remaining close to last week’s one-year high of 101.13.

Oil prices also lent support to the U.S. currency, rebounding after a steep decline in the previous session amid developments in talks between the United States and Iran. Investors are awaiting clearer signals on prospects for the resumption of crude oil flows.

The euro traded at $1.1423, hovering near its lowest level in three months after European Central Bank President Christine Lagarde sought to ease concerns over inflation during the second quarter.

Sterling was little changed at $1.3246, remaining broadly stable following the resignation of Prime Minister Keir Starmer, which paved the way for an orderly transfer of power.

Risk-sensitive currencies also came under pressure, with the Australian and New Zealand dollars each falling about 0.1 percent to $0.6991 and $0.5704, respectively.

The yen last traded at 161.59 per dollar after briefly weakening to 161.93 late on Monday, its lowest level in two years. A break beyond 161.96 would push the Japanese currency to its weakest level against the dollar since 1986.