The dollar hit a two-week high against the euro on Tuesday, advancing as traders bet the United States will keep steadily raising interest rates to fight inflation despite signs of slower U.S. economic growth. "I think the Fed will be pretty cagey. In the past six weeks we've had evidence that inflation is picking up a little and evidence that economic activity has decelerated a little so it's even more reason for them to be cautious," said Ian Gunner, head of foreign exchange research at Mellon Bank. Weak U.S. economic data, starting with slower-than-expected first-quarter gross domestic product growth last week, had raised some concerns the U.S. central bank may slow down the pace of rate rises. The Fed is likely to announce a rate decision at about 1815 GMT. Higher U.S. rates would make short-dated U.S. assets more attractive to foreign investors. The dollar hit its highest level against the euro since April 15 at $1.2831 before easing to $1.2855 by 0730 GMT. The greenback was a touch higher against the yen at 105.24 yen but still near a six-week low around 104.60 yen set last week. The euro traded little changed against the yen at 135.24 yen, not far off a three-month low below 135 yen set last week. The Australian dollar weakened slightly against the dollar ahead of an interest rate decision at 2330 GMT. The Reserve Bank of Australia is expected to keep rates unchanged at 5.25 percent.