The Dollar is Holding Steady Ahead of a Busy Central Bank Week
The US dollar strengthened on Monday, pulling away from an eight-month low ahead of a flurry of central bank meetings this week, including the Federal Reserve's, with traders looking for information on the direction of interest rate hikes.
The US dollar index, which measures the greenback against a basket of currencies, climbed 0.03% to 101.92, easing away from the eight-month low of 101.50 sets last week.
However, it was on course for a fourth consecutive monthly loss of 1.5%, weighed down by views that the Fed was reaching the end of its rate-hike cycle and that interest rates would not have to climb as much as originally anticipated. The Sterling pound was up 0.01% at $1.24005, while the kiwi gained 0.09% to $0.6500.
Moves were muted ahead of policy meetings this week by the Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE).
"We'll range trade a little bit as the market attempts to judge how the central banks respond... I believe it'll be more about what they say than what they do for all three," said Rodrigo Catril, a currency strategist at National Australia Bank (NAB).
The Fed is largely predicted to raise rates by 25 basis points, while the ECB and BoE are expected to boost rates by 50 basis points apiece. The euro was recently 0.03% higher at $1.08705 and was on track for a monthly rise of about 1.5%, the fourth month in a row.
The euro has benefited from ECB policymakers' ongoing hawkish language and fading prospects of a major recession in the eurozone. In other news, the Australian dollar increased 0.11% to $0.71175, while the Japanese yen fell slightly to 129.94 per dollar.
Core consumer prices in Japan's capital rose at the quickest annual rate in 42 years in January, according to statistics released on Friday, putting the Bank of Japan under pressure to reduce its economic stimulus.
With China returning from its Lunar New Year break, the country's purchasing managers' index (PMI) data will be released on Tuesday. "The market will be watching... hoping not to be disappointed," said Catril of NAB.
"So far, the data from China, or the vibrations from China, support the notion that a positive reopening in terms of activity is probable." Lunar New Year vacation visits within China increased 74% over the previous year as officials lifted COVID-19 travel restrictions, according to state media on Saturday. The offshore yuan was recently trading at 6.7465 per dollar, up more than 0.1%.