NEW YORK (CNN/Money) - The dollar rallied for a third straight session Monday, boosted by speculation over faster interest rates hikes and statements from Hong Kong cautioning Asian central banks against boosting euro holdings at the expense of the greenback.

Bond prices drifted ahead of the Federal Reserve's expected rate increase at its meeting on Tuesday.

The dollar hit a two-week high against the euro, which bought $1.3171 Monday, down 1.1 percent from late Friday's level at $1.3313.

The greenback also gained on the yen, buying ¥105.09 Monday, up from ¥104.71 Friday but off an intraday high set at ¥105.50.

On Tuesday, the Federal Open Market Committee is expected to raise the overnight lending rate by a quarter-percentage point for the seventh consecutive time to 2.75 percent. All 19 U.S. primary dealers polled by Reuters last week expected another increase at the March 22 meeting.

The dollar tends to be boosted by the prospect of steeper rate hikes because higher interest rates make short-dated dollar deposits and dollar-denominated investments more attractive to foreign investors.

With a quarter point increase priced into the market, attention is focused on whether the statement accompanying the rate decision will drop the word "measured" and indicate larger increases in the months ahead.

With oil prices rising at such a rapid clip, there is speculation the Fed may remove the wording to further tighten the screws on inflation.

"The removal of the word 'measured' ... would be positive for the dollar as it suggests that the Fed is giving itself room to raise rates at a faster pace later this year," Michael Woolfolk, currency strategist with Bank of New York, said in a note to clients.

The dollar was also supported by news that Hong Kong Monetary Authority chief executive Joseph Yam said Asian central banks should not boost euro holdings at the expense of the greenback.

"My fear is that it might overshoot," Yam told a meeting of business executives in Hong Kong. "The euro may become so popular in this region, it may undermine the stability of international finance."

Bank of France governor Christian Noyer also said that there is little need for concern over "diversification of public and private assets."

In Treasuries, prices edged lower in cautious trading ahead of the Fed meeting.

The benchmark 10-year note lost 4/32 of a point to 95-26/32, yielding 4.53 percent, up from 4.51 late Friday.

Yields on the 10-year-note are near seven-month highs.

The 30-year bond slipped 7/32 of a point to 108-3/32 to yield 4.82 percent, up from 4.81 percent late Friday. Bond prices and yields move in opposite directions.

The five-year note fell 4/32 of a point to yield 4.20 percent, while the two-year slipped one tick, yielding 3.73 percent.

"The bond market appears evenly split between those who expect the Fed to maintain their 'measured' verbiage, with one camp feeling that nothing dramatic has been visited upon the economic landscape to persuade them otherwise," Kenneth Logan, a market analyst at Thomson IFR, told Reuters.

No major economic data was released Monday, but the February consumer price index is due out Wednesday. The report is one of the Fed's favorite inflation gauges and so has the potential to set the market seesawing.

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