LONDON—The euro rallied on Tuesday, while the dollar hovered below last week’s peak.
The jump in the euro, which sent it further away from the sub-parity levels of last week, coincided with falling expectations for an aggressive 100 basis point hike from the Federal Reserve this month, which knocked the dollar.
The euro rose to as high as $1.0259, up 1.2 percent on the day and its strongest since July 6 as money markets priced in a 60 percent chance of a 50 basis point hike on Thursday, up from 25 percent on Monday.
The dollar index dropped 0.9 percent to 106.47, well back from the high of 109.29 last week, a level not seen since September 2002….