NEW YORK (CNN/Money) - The dollar reached a two-year high against the euro Tuesday and lingered near a 26-month record against the yen as investors bet higher interest rates would make U.S. assets more attractive to investors.

Treasury prices rose in a day devoid of economic data, following the first installment of a three-day government debt auction.

The euro bought $1.1782, down from $1.1808 in the previous session, after hitting $1.1711 earlier in the session, reaching its lowest level in two years against the dollar.

The dollar bought ¥117.23, down from ¥117.64 late Monday.

With no economic turbulence in sight, economists have raised their forecasts for the peak in the Federal Reserve's target short-term rate, closer to 5 percent from earlier 4.75 percent estimates.

Rising interest rates generally help the dollar, as they make dollar-denominated securities more attractive to foreign investors.

"Sentiment is quite positive for the dollar. We are breaking levels so short term there is momentum. Fundamentally, we are looking at interest rates," Bilal Hafeez, currency strategist at Deutsche Bank, told Reuters.

The dollar, which is up about 13 percent against the euro and 14 percent against the Japanese yen this year, according to Reuters, was also bolstered against the European currency by unrest in France.

In Treasury markets, the benchmark 10-year note rose 17/32 to 97-18/32 to yield 4.56 percent, down from 4.63 in the previous session. The 30-year bond gained 31/32 to 109-1/32 to yield 4.75 percent, down from 4.82 late Monday. Bond prices and yields move in opposite directions.

In shorter-dated debt, the two-year note rose two ticks, yielding 4.42 percent. The five-year note added 8/32, yielding 4.48 percent.

With no major economic reports delivered Tuesday, investors remained focused on Tuesday's government-debt auction, the first part of a $44 billion offering.

Besides Tuesday's $18 billion sale of three-year notes, the government also plans to sell an additional $13 billion worth of five-year Treasuries, and $13 billion in 10-year notes on Wednesday and Thursday.

Investors have been optimistic about this week's bond auction, since selling in the last few weeks had pushed up yields and lowered prices.

"I think the auctions will go fine. There's going to be continued foreign demand. We're up toward the high [yield] range for the year. I think we'll do OK," Alan De Rose, a trader at CIBC World Markets in New York, told Reuters.

-- from staff and wire reports

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For updated bond charts, click here.

For more on the greenback's rally, click here.